Iowa Enters Federal Tax Credit Program for Private School Scholarships
Iowa Joins Federal Tax Credit Program for Private School Scholarships
Iowa has decided to join a federal tax credit program that was introduced as part of President Donald Trump’s “One Big, Beautiful Bill.” This initiative is designed to provide scholarships for students who attend private schools. The program allows taxpayers to receive a tax credit of up to $1,700 for donations they make to approved “scholarship granting organizations” — which are nonprofit entities established to offer scholarships to students attending private schools.
Governor Kim Reynolds announced on January 5 that Iowa will participate in this program when it becomes active in 2027. The state’s decision comes at a time when the political spotlight is on Iowa ahead of the 2020 election, with many interested in updates about Iowa politics.
“Iowa believes in empowering every student and family with world-class educational options — from our K-12 public schools to public charter schools, accredited private schools and homeschooling — so they can choose the best place and path for their future,” Reynolds stated in a release. “The Trump administration’s federal tax credit will complement Iowa’s existing programs, expanding opportunity even further while reinforcing the state’s commitment to school choice.”
Reynolds’ office will collaborate with the Iowa Department of Education to identify eligible scholarship granting organizations that will be able to distribute the funds starting in 2027. Only students whose families have an income below 300% of the federal poverty level, currently around $96,000 for a family of four, will be eligible for these scholarships.
According to federal law, scholarship recipients may only use the funds for qualified expenses. These include tuition, fees, books, school supplies, room and board, uniforms, transportation, computer technology, and internet access.
This new program aims to provide additional resources for parents who want to send their children to private schools in Iowa. The state already offers a similar state tax credit for donations to approved School Tuition Organizations, which also provide tuition grants to students. In addition, in 2023, Reynolds signed a law that makes every Iowa family eligible for a taxpayer-funded education savings account (ESA) that can be used to pay for private school costs.
Currently, 41,044 students are receiving state-funded ESAs. Each scholarship is worth $7,988 per student, resulting in a total cost of $327.9 million. Unlike the new federal program, Iowa’s ESA program does not have income limits.
Key Features of the New Federal Program
- Tax Credit: Up to $1,700 for donations to approved scholarship granting organizations.
- Eligibility: Students from families with income below 300% of the federal poverty level.
- Usage of Funds: Limited to qualified educational expenses such as tuition, books, and transportation.
- Implementation: Begins in 2027, with the state working closely with the Iowa Department of Education to designate eligible organizations.
Existing State Programs
Iowa already has several programs in place that support private education:
- State Tax Credit for School Tuition Organizations: Provides tuition grants to students.
- Education Savings Accounts (ESAs): Available to all families, with no income restrictions.
These programs demonstrate Iowa’s ongoing commitment to providing diverse educational opportunities for its students. With the addition of the new federal tax credit program, the state is taking another step toward expanding access to private schooling for families who may not otherwise be able to afford it.
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