August 15, 2023

Does Your State Offer Tax Credits for Private K-12 School Voucher Contributions?


Twenty-one states provide public support to private and religious K-12 schools through school voucher tax credits. These policies reimburse individuals and businesses for “donations” they make to organizations that give out vouchers for free or reduced tuition at private K-12 schools. The credits range from 50 percent to 100 percent of the amount contributed, which far exceeds the tax benefit available for gifts to groups serving other populations such as veterans or survivors of domestic violence.

An ITEP analysis of data obtained from three state tax agencies revealed that wealthy families are overwhelmingly the ones using these credits to opt out of paying tax to public coffers. In all three states providing data, most of the credits are being claimed by families with incomes over $200,000. Wealthy families’ interest in these programs is driven partly by a pair of tax shelters that can make “donating” profitable in many states. These shelters hinge on stacking state and federal tax cuts and are advertised by schools, accountants, and others as a way to get a “double tax benefit” and “make money” in the process. While the IRS has taken significant steps to rein in some of this tax shelter behavior, it has yet to end the practice entirely.