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federal education tax credit Archives - North Carolina Coalition for Charter Schools

Jul 30
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How could the federal education tax credit impact NC?

By News

A new analysis from the American Federation for Children sheds light on how the federal education tax credit could impact students in covered states, including North Carolina. AFC estimates that 51.7 million students nationwide, or 91.7%, are eligible to receive a scholarship.

North Carolina became a “Covered State”–participating in the tax credit– when the General Assembly overrode Governor Stein’s veto of House Bill 87, “Educational Choice for Children Act” in June.  The state is one of 31 that have opted in so far, according to AFC.

Here’s some background on how the scholarship works, according to a press release from the U.S. Treasury Department:

Scholarship-granting organizations that are included on one or more state SGO lists can receive qualified contributions from taxpayers and use those funds to provide scholarships for eligible students. Taxpayers who make qualified contributions may claim a federal tax credit, subject to applicable statutory requirements and forthcoming Treasury and IRS guidance.

And here are some early takeaways about impact directly from the AFC report:

  • Eligibility is near-universal in every state. The eligible share ranges from 85.9% (District of Columbia) to 96.2% (Maine).
  • 31 states have opted in, home to 30.9 million eligible students (59.8% of the national total).
  • 20.8 million eligible students are waiting in the 19 states and DC that have not yet decided.
  • … Most families qualify. The income limit is 300% of area median income, which ranges from … $234,000 to nearly $500,000 for a family of four, depending on location.

What about North Carolina impacts?

According to AFC, 92.7% of the state’s students are eligible–nearly 1.7 million students. Take a look at the AFC chart of state-by-state eligibility.

Screenshot from the AFC report (“A Once-in-a-Generation Opportunity for National School Choice”).

Public charter school families are eligible to participate. This fact sheet from the U.S. Department of Education notes the following uses:

Scholarships can be used for any qualified education expense of an eligible student, which includes a broad set of expenses incurred in connection with or required by any K-12 public, private, or charter school. Examples include tuition for students to attend private schools of choice, tutoring at public schools, and support services for students with disabilities.

Read more about preview guidance from the U.S. Treasury Department in this Coalition blog post.

Above: Shutterstock photo.

Jun 17
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New preview guidance on the federal education tax credit

By News

What can you expect when the federal education tax credit takes effect next January? North Carolinians now have a better idea, based on a preview of guidance released last week by the U.S. Treasury Department. According to preview guidance, Treasury and the IRS plan to issue proposed regulations by the end of September.

North Carolina became a “Covered State”–participating in the tax credit– when the General Assembly overrode Governor Stein’s veto of House Bill 87, “Educational Choice for Children Act.”  According to the U.S. Department of Education, North Carolina is the 28th state to opt in to the tax credit.

Formal guidance, according to recent remarks from Deputy Assistant Secretary for Tax Policy Kevin Salinger, is expected to note this:

  • Eligible SGOs (scholarship granting organizations) must spend a minimum of 90% of income on scholarships.
  • Being “located in” a state is defined as being authorized to do business there. The rules are expected to offer a path for SGOs to do business in multiple states.
  • Schools served by scholarships include public, private, and religious schools “providing K-12 elementary and secondary education as defined under state law.” If “treated as a school under the law,” home schools are also eligible.
  • Income verification for students will likely be through “paystubs, tax returns, IRS transcripts, Forms W-2, or through crediting agencies or commercial data sources”–or through participation in a needs-based government program.

Here’s the background information on the tax credit included in Treasury’s press release:

The new scholarship tax credit under section 25F is intended to expand educational opportunity by encouraging private contributions to scholarship-granting organizations. Participating States may opt in to the program and provide to the IRS a list of eligible scholarship-granting organizations located in their state. Scholarship-granting organizations that are included on one or more state SGO lists can receive qualified contributions from taxpayers and use those funds to provide scholarships for eligible students. Taxpayers who make qualified contributions may claim a federal tax credit, subject to applicable statutory requirements and forthcoming Treasury and IRS guidance.

The credit is designed to support scholarships for K–12 education expenses, helping families access educational options that meet their children’s needs. Treasury and the IRS are developing proposed regulations to provide States, scholarship-granting organizations, taxpayers, and other stakeholders with clear rules for implementation, compliance, reporting, and program integrity ahead of the credit’s expected 2027 launch.

Read more about the Treasury guidance from EdNC.

Public charter school families are eligible to participate. This fact sheet from the U.S. Department of Education notes the following uses:

Scholarships can be used for any qualified education expense of an eligible student, which includes a broad set of expenses incurred in connection with or required by any K-12 public, private, or charter school. Examples include tuition for students to attend private schools of choice, tutoring at public schools, and support services for students with disabilities.

For some families, this could mean using scholarships to pay for private school tuition at a school they choose. Other students will benefit from buying the equipment or uniforms needed for a career training program at a secondary school. Other families may seek a scholarship for tutoring or for after-school enrichment programs. The options are expected to vary in line with students’ unique academic needs, the focus of a particular SGO, and the educational opportunities available to students.

The American Federation for Children has a web page devoted to information about the tax credit. Learn more here.

Above: Shutterstock photo.