ISSUE ANALYSIS

a division of Home School Legal Defense Association
March 1, 1999

Educational Tax Credits

Many home school and private school parents understandably feel they are being double-taxed. They demonstrate personal responsibility by providing for their own children’s education, yet they are required also to provide for the education of their next-door neighbor’s children.

Some conservative leaders have offered government vouchers as a solution to this problem. These vouchers would come in the form of a check from the government, which parents could use to send their children to the school of their choice or pay for their home schooling expenses. On the surface, this idea is commendable, but the myriad strings attached to any government money would limit the freedoms of private and home schools. The Home School Legal Defense Association, as a result, has adopted a position of opposing government vouchers.

As an alternative, HSLDA recommends another vehicle: educational tax credits. Parents and individuals who provide for a child’s education should be allowed to keep some of their tax money that would otherwise have been used to fund public education. This goal could be accomplished through a tax credit.

Educational tax credit legislation can typically be divided into two categories: tax credits for individuals or corporations who contribute to a non-profit scholarship fund and tax credits reimbursing parents for educational expenses incurred for their children. Arizona passed an educational tax credit law which falls into the first category while Minnesota passed a tax credit falling into the second.

In drafting the Virginia educational tax credit bill, HSLDA blended these two innovative approaches into one bill, making a hybrid of the Arizona and Minnesota laws. The Virginia educational tax credit bill gives tax credits both for parents who provide their own children’s educational expenses, as well as for individuals who make contributions to nonprofit organizations dedicated to providing school tuition grants. The limit for contributions made to organizations is $200, but the limit for parents is either $2500 or half of the state’s average per-pupil cost, whichever is greater.

Why Home School Parents Support Educational Tax Credits

Educational Tax Credits Will Give Parents True Choice in Education

  • With the money parents will be able to save, they will have greater freedom in choosing how and where their children are educated.
  • This tax credit will help reduce the “double tax burden” on parents who choose private or home education. Presently these parents must pay for both their own children’s education and public school education.

Educational Tax Credits Will Benefit Public Schools

  • By encouraging students to attend private schools or home schools, the tuition tax credit will reduce overcrowded public school class sizes and the student-to-teacher ratio, making more teachers available to public school students.
  • The reduction in class sizes will be especially helpful to fast-growing communities that are experiencing overcrowding in their schools. These communities would be able to slow the growth of their enrollment rate.

Educational Tax Credits Will Benefit Low-Income Families

  • Most educational tax credit proposals provide a credit for businesses and private individuals who contribute to a nonprofit scholarship fund, which are usually dedicated to helping low-income families. This type of credit provides an incentive to help give low-income families true choice in their children’s education.

Other Evidence Supporting Educational Tax Credits

Educational Tax Credits Have Been Successful in Other States

  • Arizona taxpayers may claim a tax credit (up to $500) equal to the amount they contribute to any nonprofit organization which allocates 90% of its funds for school tuition grants.
  • Minnesota has had a tax deduction for 15 years. This idea has been so successful that. in 1997, the state expanded the deduction to a $1000 per child tax credit.

Parents Want Educational Tax Credits

  • On January 19-20, 1999, for example, Conquest Communications & Data, L.L.C. conducted a poll of 400 Virginia voters. The poll showed that 54.5% supported a bill that would give a tax break to parents who want to send their children to the public, private, church-run, or home school setting of their choice. Nearly 68% agreed that school choice in Virginia will raise academic standards, allowing more children to receive a quality education, and 59.3% of those surveyed would support legislation offering scholarships to low-income families and giving tax credit to those who help send low-income children to the school of their parents’ choice.

Educational Tax Credits Are Constitutional

Educational Tax Deductions Have Been Upheld by the U.S. Supreme Court

In Mueller v. Allen, 463 U.S. 388 (1983), a Minnesota educational tax deduction initiative, which is similar in nature to an educational tax credit, was upheld by the U.S. Supreme Court. The Court found that even though private and religious schools indirectly benefited the most, it did not violate the Establishment Clause.

Educational Tax Credits Satisfy the U.S. Supreme Court’s Lemon Test

The U.S. Supreme Court requires government action which benefits religious organizations to satisfy a 3-prong test established in Lemon v. Kurtzman, 403 U.S. 602 (1971). In Kotterman v. Killian, 972 P.2d 606, 288 Ariz. Adv. Rep. 5 (1999), the Arizona Supreme Court recently held that educational tax credits satisfy all three prongs of the Lemon test:

  1. Educational tax credits have a secular purpose to provide all parents a tax credit for their children’s educational expenses, regardless of the form of education: public, private, or religious;
  2. Educational tax credits have a primary effect of neither advancing nor inhibiting religion.
  3. Educational tax credits avoid excessive government entanglement with religion.


For further information on this, contact the National Center for Home Education at: 540.338.7600, or by fax 540.338.8606, or e-mail NationalCenter@hslda.org. Permission to reprint granted.