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    What Are Vouchers, Tax Credits, Tax Deductions

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    Education Policy Center
    Tax credits, for donations to school tuition organizations, reduce the tax liability of a corporation or individual. Education savings accounts are governmentfunded private accounts managed by parents. Some states allow the individual to carry forward the remaining credit to the next tax year.

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    What Are Vouchers, Tax Credits, Tax Deductions

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    Education Policy Center
    474 views1 page
    Tax credits, for donations to school tuition organizations, reduce the tax liability of a corporation or individual. Education savings accounts are governmentfunded private accounts managed by parents. Some states allow the individual to carry forward the remaining credit to the next tax year.

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    Tax credits, for donations to school tuition organizations, reduce the tax liability of a corporation or individual. Education savings accounts are governmentfunded private accounts managed by parents. Some states allow the individual to carry forward the remaining credit to the next tax year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    474 views1 page

    What Are Vouchers, Tax Credits, Tax Deductions

    Uploaded by

    Education Policy Center
    Tax credits, for donations to school tuition organizations, reduce the tax liability of a corporation or individual. Education savings accounts are governmentfunded private accounts managed by parents. Some states allow the individual to carry forward the remaining credit to the next tax year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    WhatAreEducationalVouchers,ScholarshipTaxCredits,andEducationSavingsAccounts?

    Vouchers
    Schoolvouchers(usuallycalledscholarships)haveadesignateddollarvaluethatmaybeappliedtowardfullor
    partialpaymentoftuitionorfeesattheparticipatingprivateschooloftheparents'choice.Vouchersaresimilar
    totheG.I.BillandPellGrants,whicharescholarshipsfundedbythegovernmentandgiventopostsecondary
    studentsforuseinthereligiousornonreligiousschooloftheirchoice.

    CorporateandIndividualTaxCreditsforScholarshipDonations
    Corporateandindividualtaxcredits,fordonationstoschooltuitionorganizations(STOs),reducethetaxliability
    ofacorporationorindividual.Somestatesalloweithercorporateorindividualtaxcreditsorboth.Creditsmay
    bedollarfordollarorapercentageofthedonation.

    Iftheindividualtaxcreditisrefundable,thisallowstheindividualtoreceivearefundforthetaxcreditevenifhe
    doesnotowetaxesorthecreditexceedstheamountheowes.Anonrefundabletaxcreditdoesnotrefundany
    excesscredittothetaxpayerforthetaxyear.Forexample,ifLucyowes$200intaxesandhertaxcreditis
    worth$250becauseshedonatedthatamounttoanSTO,Lucywouldowenotaxesand,inastatewitha
    refundabletaxcredit,shewouldreceivea$50refund.Ifshelivesinastatewithanonrefundabletaxcreditshe
    wouldowenotaxesbutwouldnotreceivea$50refund.Somestatesallowtheindividualtocarryforwardthe
    remainingcredittothenexttaxyear.

    EducationSavingsAccounts
    EducationSavingsAccountsaregovernmentfundedprivateaccountsmanagedbyparentsforuseonavariety
    ofeducationalexpensesfortheirchild,usingfundsthatwouldhavebeenspentonthechildinthepublicschool
    system.ParentsmaychooseamongoptionssuchasprivateK12schools,onlineeducationprograms,
    certifiedprivatetutors,booksorothercurricularmaterials,andcommunitycollegecourses.Familiesmayalso
    savesomeofthemoneyforfuturehighereducationexpensesthrougha529collegesavingsprogram.The
    statedepartmentofeducationcalculatesastudentsperpupilamountthroughthestatesfinanceformulaand
    makesregulardepositsintotheaccounts.

    Arizonalawmakerswerethefirsttocreatesuchaprogram,calledEmpowermentScholarshipAccounts
    (ESAs).Inthisprogram,thestateofArizonadeposits90percentofthefundsforaparticipatingchildintoan
    account,allowingfamiliestopayforavarietyofeducationalservicesthroughuserestricteddebitcards.

    IndividualTaxCreditsforK12EducationalExpenses
    Individualtaxcredits,forpersonaleducationalexpenses,reducethetaxliabilityofanindividual.Creditsmaybe
    dollarfordollarorapercentageofexpensesincurred.Arefundabletaxcreditallowstheindividualtoreceivea
    refundforthetaxcreditevenifhedoesnotowetaxesorthecreditexceedstheamountheowes.A
    nonrefundabletaxcreditdoesnotrefundanyexcesscredittothetaxpayerforthetaxyear.Forexample,if
    Cynthiaowes$200intaxesandhertaxcreditisworth$250becauseofeducationalexpensessheincurredfor
    herchild,astatewitharefundabletaxcreditwouldsendherarefundcheckof$50.Ifshelivedinastatewitha
    nonrefundabletaxcredit,shewouldnotreceivea$50refund.Somestatesallowtheindividualtocarryforward
    theremainingcredittothenexttaxyear.

    IndividualTaxDeductionsforK12EducationalExpenses
    Individualtaxdeductionsforpersonaleducationalexpensesreducetheamountoftaxableincomeforan
    individualbeforethetaxliabilityiscalculated.ForexampleifJohnandSallyhaveataxableincomeof$50,000a
    yearandtheybuy$100intextbooksfortheirson,theirtaxableincomebecomes$49,900.

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