Tuition Tax Credits

Education tax credits are intended to reduce the price of private education services, while encouraging parents to use and purchase private resources. Families are allowed to subtract a predetermined amount of private educational expenses from their tax liability. Tuition tax credits represent a unique attempt to build private markets in education.

How are tax credits different than tax deductions?

Tuition tax credits help families to spend money on private education services by allowing all or a portion of this expense to be removed from the amount of tax a family must pay to the state government. The tax a family owes is first determined, than the credit reduces a family’s tax burden by the amount of the credit. Unlike a tax credit, a tax deduction reduces the amount of income a family must pay taxes on by the percentage of tax rate rather than the entire dollar amount of the deduction.

Why are tuition tax credits controversial?

Tuition tax credits actively promote private education. Families are provided with a financial incentive, an education tax credit, to pursue private educational opportunities. Thus, opponents claim tuition tax credits undermine public education. Proponents insist tuition tax credits provide parents with opportunities previously reserved for wealthy families.

What are the possible advantages of tuition tax credits?

• Increased Choice. Tax credits provide parents with money to choose the school they most desire for their child, rather than the one they can afford.

• Access to Good Schools. Tuition costs, especially for poor, urban families can prohibit a child from attending a good school. Tax credits help address this issue.

• Improved Efficiency. By facilitating choice and competition, public schools are encouraged to improve services by increasing efficiency.

• Empowered Parents. Allowing parents greater control over money spent on education, prompts families to take a greater interest in their child’s education