Iowa state officials have raised tax credit caps for donations to groups that offer student scholarships, paving the way for more students to attend private schools beginning in 2020.
“We are thrilled that the legislature passed – and the governor signed – a tax bill containing an increase to the School Tuition Tax Credit program, which will now be capped at $15 million beginning in 2020,” Iowa Alliance for Choice in Education executive director Trish Wilger said of the 15 percent increase in tax credits for donations to school tuition organizations (STOs).
“In 2018 and years prior, where we had a $12 million cap, the STO program was able to serve just under 11,000 students,” Wilger said. “Based on that history, with a cap of $15 million in 2020, we project that the STO program could serve approximately an additional 2,000 to 3,000 students.”
Iowa Gov. Kim Reynolds made the expansion plan official by signing off on H.F. 779 in May.
STOs are defined as charitable organizations that take in donations from individuals and businesses for the express purpose of providing scholarships for students from low- and middle-income households to attend accredited private schools. Taxpayers who give to the programs are also eligible to receive credits against state income tax owed for up to 65 percent of their total contribution.
To qualify for one, a student’s family income must be no more than 400 percent of the federal poverty level. Currently, there are at least 145 state schools participating in the program, with the average scholarship amount for 2019 in the neighborhood of $1,600.
Wilger thinks the program could have an even greater impact.
“Education savings accounts would have the greatest potential to create broad-based, transformative change in the school choice arena while putting parents in the driver’s seat,” she said. “Depending on program design, parents would have the greatest access to all educational options and total freedom of choice when it comes to their child’s education provider.”