19 States Offer Tax Credits for Private School Scholarship Donations

Why It Matters

The credits divert significant public funds toward private education, reshaping school‑choice dynamics and sparking fiscal and constitutional challenges.

Key Takeaways

• 18 states provide tax credits for private school scholarships
• Ohio lost over $80M revenue since program start
• Scholarship organizations grew from 7 to 74 since 2021
• Donors receive up to $750 credit, $1,500 joint
• Critics argue credits divert funds from public schools

Pulse Analysis

The tax‑credit scholarship model has spread beyond Ohio, with 18 states now offering donors a credit for contributions to private‑school scholarship organizations. Originating in the late 1990s, these programs were designed to expand school‑choice options for low‑ and middle‑income families while leveraging private philanthropy. By converting charitable donations into a direct reduction of state income tax, legislators create a fiscal incentive that sidesteps traditional budget appropriations. The rapid adoption reflects a broader national trend toward market‑based education reforms and growing political support for alternatives to public schooling, and influence policy debates.

In Ohio, the program has become a fiscal flashpoint, costing the state more than $80 million in lost revenue since its 2021 launch. The credit, capped at $750 per donor ($1,500 for joint filers), has already reduced income‑tax collections by $21 million in fiscal 2024 and $23.1 million in 2025, with projections climbing to $25.5 million by 2027. Coupled with a $1 billion annual voucher budget, the combined subsidies intensify criticism that public funds are being diverted to private institutions, fueling lawsuits and partisan battles over constitutionality.

The next phase may reshape the landscape further. A federal tax credit slated for 2027 under the One Big Beautiful Bill Act could amplify donor incentives nationwide, potentially prompting additional states to adopt similar schemes. Meanwhile, education advocates on both sides are mobilizing: school‑choice groups tout expanded access, while teachers’ unions warn of eroding public‑school funding and equity. Legal challenges, already underway in more than 300 districts, could set precedents that either cement or curtail the use of scholarship‑granting organizations as de‑facto voucher mechanisms.

19 States Offer Tax Credits for Private School Scholarship Donations

By Laura Hancock

cleveland.com

(TNS)

COLUMBUS, Ohio – Eighteen states offer tax credits similar to what Ohio offers for donations to organizations that provide tuition scholarships to students, primarily benefiting private‑school families.

According to the National Conference of State Legislatures, most states began offering tax credits for donating to scholarship‑granting organizations since the turn of the century.

The Ohio General Assembly established income tax credits for donations to scholarship‑granting organizations in the 2021 state budget bill.

The following are the other states that offer credits, according to the National Conference of State Legislatures:

• Alabama: Established in 2013

• Arizona: Established in 1998, with several bills expanding it since

• Arkansas: Est. in 2021

• Florida: Est. in 2018

• Georgia: Est. in 2008

• Indiana: Est. in 2009

• Iowa: Est. in 2006

• Kansas: Est. in 2016

• Louisiana: Est. in 2012

• Montana: Est. in 2015

• Nevada: Est. in 2015

• New Hampshire: Est. in 2012

• Oklahoma: Est. in 2011

• Pennsylvania: Est. in 2001 and has since expanded.

• Rhode Island: Est. in 2006

• South Carolina: Est. in 2018

• South Dakota: Est. in 2016

• Virginia: Est. in 2012

Ohio has lost more than $80 million in state revenue since launching its tax credit program, which adds another layer of public support for private schools on top of vouchers.

Seventy‑four scholarship‑granting organizations now operate statewide, up from seven in 2021, offering tuition help to students from low‑ and middle‑income families. The Angel Scholarship Fund alone has raised $19.6 million since 2022 for Catholic schools in Northeast Ohio.

Supporters say the credit expands access to private education. Opponents, including the Ohio Education Association, say it diverts money from public schools, which serve more than 80 % of students, and primarily benefits families already in private schools.

The credits reduced state income tax collections by $21 million in fiscal 2024 and $23.1 million in 2025. They are projected to reach $24.3 million this year and $25.5 million by 2027.

Ohio already spends about $1 billion annually on vouchers.

Donors can receive up to $750 in state tax credits, or $1,500 for joint filers. A larger federal income tax credit is coming in 2027, included as part of the One Big Beautiful Bill Act that Congress passed last year.

Critics say SGOs are another voucher system at a time when lawmakers have scaled back increases to public‑school funding. More than 300 districts are suing the state, claiming vouchers are unconstitutional. Private‑school advocates say SGOs help families bridge tuition gaps and support school choice.

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