Arizona’s private-school tuition tax-credit law came into effect in 1997 under House Bill 2074. The legislation would provide scholarships for kids to pursue their education dreams in private schools.
Individuals and corporations can donate money to help parents pay for private-school tuition. Donors receive dollar-for-dollar credit against their income-tax bills. The donations are collected and distributed as scholarships by non-profit organizations called school-tuition organizations, or STOs.
Those organizations have amassed funding for private-school scholarships by diverting tax dollars from the state’s General Fund.
At the same time, public schools for a second year in a row are facing midyear budget cuts.
Tax-credit laws essentially redirect public funds. Rather than going to the state as taxes, the money goes to scholarships for students to attend a private school or pay fees to a public school for support of extracurricular activities that require a fee to participate such as paying for band uniforms, athletic equipment and trips to competitive events.
Under one law, individual donors can redirect up to $1,000 a year to fund scholarships and take a dollar-for-dollar credit off their state tax bills for private scholarships. For public schools you can redirect $400 for married taxpayers filing a joint return; $200 for a single taxpayer or heads of household.
The donations go to school-tuition organizations, which handle the money and allocate the scholarships.
The corporate tax-credit law does set some income limits in order to direct scholarships to lower-income students, but the limits are relatively high. It allows scholarships for a family of four with a gross income of up to $75,467 – about $6,000 higher than the state’s median income for families that size.
Public and charter schools are eligible schools that provide education for K-12 students. You do not need to have children in school to qualify for the tax credit.
The mission of Arizona Scholarship Fund is to financially assist parents throughout Arizona in meeting the academic, social, and spiritual needs of their children by providing scholarships that will allow their children to attend the non-governmental school of the parents’ choosing.
- Arizona Scholarship Fund has several funds a family can qualify for. Families can qualify for more than one fund in a given school year. All funds are awarded in an equable manner as funds are available.
- General Fund – annual $1000 per student awards given on a first-come, first-served basis to families within 185% of federal poverty guidelines. Awards given in August.
- Disadvantaged Students Fund – annual awards given on a first-come, first-served basis to families under the federal poverty guidelines. Awards given in August.
- Disabled Students Fund – students with an IEP
- Foster Students Fund – students who are currently in foster care
- Specific School Fund – students enrolled in participating schools; parents must apply through the school
- Specific Community Fund – students connected to a specific community organization (such as a Lions or Rotary Club), church or business; must apply to the committee overseeing the fund
- Family Aid Fund – allows parents to find sponsors for their children; open to both Arizona and non-Arizona residents
- Corporate Scholarship Funds – please contact Executive Director for specific information regarding this fund.
To learn more, go to: www.AZscholarships.org
Despite a worsening economy, the scholarship shortfall for the program targeting lower-income students swelled from $2.6 million in 2007 to $7.4 million in 2008.
So ask yourself – Are you happy with the way the State of Arizona is spending your tax dollars?
Would you rather redirect your tax dollars to help with the education of our children?
Call for answers to your questions and for the form to redirect your tax dollars.
Karl Schroeder, RFC
Investment Advisor Representative
Schroeder Financial Services, Inc.