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Tax & AccountingOctober 19, 2022

What states offer scholarship contribution tax credits?

By: CCH AnswerConnect Editorial

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There are now 20 states that offer businesses and individuals nonrefundable income tax credits for contributions to nonprofit scholarship-granting organizations. The nonprofits use the contributions to provide scholarships to eligible K-12 students to attend qualified schools.

Eligible students generally must come from low-income families. Some states have additional or other eligibility criteria. For example, both South Carolina and Utah provide credits to fund scholarships for students with special or exceptional needs.

What is a qualified school?

13 states limit scholarships to students who attend private schools in the state.

  • Arizona
  • Arkansas
  • Georgia
  • Illinois
  • Iowa
  • Kansas
  • Louisiana
  • Montana
  • Oklahoma
  • Rhode Island
  • South Carolina
  • Utah
  • Virginia

Illinois expanded its credit to include private technical academies beginning January 1, 2022. 

5 states allow scholarships for students to attend either private or public schools. 

  • Alabama
  • Indiana
  • Missouri
  • New Hampshire
  • Pennsylvania

Some of these states restrict scholarships to public schools located outside the school where the student lives.

Alaska has a wide-ranging education credit that includes contributions to nonprofit organizations for scholarships granted to dual-credit students. A dual credit student is a secondary level student in the state who simultaneously earns college and high school credit for a course.

Florida’s credit applies to scholarships for:

  • tuition and fees at private schools; or
  • transportation expenses to public schools located outside the district in which the student resides.

How much are the credits?

The amount of the credits varies from state to state based on:

  • all or part of the taxpayer’s contribution;
  • all or part of the taxpayer’s tax liability for the tax year; or
  • a specific dollar amount for each tax year.

Can taxpayers carryforward credits?

16 states allow taxpayers to carryforward unused credits.

  • Arizona
  • Arkansas
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Louisiana
  • Missouri
  • Montana
  • New Hampshire
  • Oklahoma
  • South Carolina
  • Utah
  • Virginia

Can taxpayers transfer credits?

Florida is the only state that allows taxpayers to transfer credits.

Can pass-through entities qualify for credits?

Pass through entities can qualify for the credits in 19 states.

  • Alabama
  • Arizona
  • Arkansas
  • Georgia
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Louisiana
  • Missouri
  • Montana
  • New Hampshire
  • Ohio
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Utah
  • Virginia
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CCH AnswerConnect Editorial

Comprising of industry’s most trusted experts, the Wolters Kluwer CCH AnswerConnect Editorial Staff are knowledgeable and highly qualified to analyze and offer guidance on the latest, important tax topics. They ensure every topic is thoroughly researched and meticulously broken down so you receive the most up to date and accurate information available. Read more of their insights on CCH AnswerConnect.

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