Original Individual Income Tax Credit Scholarship Program
- Individual Tax Credit/Deduction
- Enacted 1997
- Launched 1997
Arizona offers tax credits to individuals supporting School Tuition Organizations (STOs), nonprofits that provide private school scholarships to students in need. This tax-credit scholarship program allows taxpayers to receive tax credits for their donations to nonprofit organizations that provide school scholarships to K–12 students. Students are able to receive more than one scholarship from STOs in a given year. Learn more about the program on this page, including eligibility, funding, regulations, legal history and more.
We do not administer this program.
America’s First Tax-Credit Scholarship Program
Scholarships Awarded (2018–19)
of Families with Children Eligible Statewide
Participating Schools (2018–19)
Scholarship Organizations Awarding Scholarships (2018–19)
Average Scholarship Value (2018–19)
Value (Average Scholarship) as a Percentage of Public School Per-student Spending
Arizona’s Original Individual Income Tax Credit Scholarship Program Participation*
School tuition organizations (STOs) determine scholarship amounts. In tax year 2020, individual taxpayers that contribute to STOs may claim a dollar-for-dollar credit of up to $593, and married couples filing jointly may claim up to $1,186. The amount an individual can claim for a credit increases each year by the amount of the Consumer Price Index.
Students must be in grades K–12 or be a preschool enrollee identified by the school district as having a disability under the Individuals with Disabilities Education Act or Section 504 of the Rehabilitation Act. STOs must consider financial need when awarding scholarships and cannot make decisions based solely on donor recommendations. Individual taxpayers may not make STO contributions earmarked for their own dependents, nor may donors make agreements among one another to “trade” donations for their respective dependents.
EdChoice Expert Feedback
Arizona’s original individual-donor tax-credit scholarship program—the first in the nation—helps tens of thousands of students access schools that are the right fit for them, but policymakers could do more to expand educational opportunity.
All students are eligible to receive a tax-credit scholarship, making this among the most expansive educational choice programs in the nation. Statewide, 6.7 percent of students participate in one of Arizona’s private educational choice options (including the Low-Income Corporate-Donor Tax-Credit Scholarship Program, the “Switcher” Tax-Credit Scholarship Program, Lexie’s Law for Disabled and Displaced Students Tax-Credit Scholarship Program, and the Empowerment Scholarship Account Program). This is the highest EdChoice share in the nation.
The average scholarship size is only about $1,740, which is only about 17 percent of the average expenditure per student at Arizona’s district schools, but there is no cap on scholarship values and students may receive multiple scholarships. Students with special needs, students in foster care, students from low-income families, and those who have switched from the public school system can also receive scholarships via the other tax-credit scholarship programs. Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but donors can only claim up to $593 in tax credits annually (or up to $1,186 for married couples filing jointly).
In order to expand access to educational choice, Arizona policymakers should increase the amount of tax credits that individual donors can receive.
Arizona’s scholarship program generally avoids unnecessary and counterproductive regulations.
Rules and Regulations
- Income Limit: None
- Prior Year Public School Requirement: None
- Geographic Limit: Statewide
- Enrollment Cap: None
- Scholarship Cap: None
- Testing Mandates: None
- Credit Value: 100 percent
- Per Donor Credit Cap: $593 (individual) / $1,186 (married)
- Budget Cap: None
- Use at least 90 percent of contributions for scholarships
- Make scholarships available for more than one school
- May allow donors to recommend student beneficiaries but shall not award, designate or reserve scholarships solely on the basis of donor recommendations
- Cannot exchange recommendations of student beneficiaries with other donorsReport annually to the state:
- Data on accepted contributions, grants awarded, the dollar amount of scholarships granted to students who qualify for the free or reduced-price lunch program, the dollar amount of scholarships granted to those students whose household income falls between 185 percent and 342 percent of the federal poverty level ($48,470 and $89,604 for a family of four in 2020–21)
- the amount of money being held for identified student scholarships in future years, a list of participating schools with the number and dollar amount of scholarship awards received
- the salaries of the STO’s top three officials for the fiscal year; and
- proof of independent review of financial statements by a certified public accountant
On January 26, 1999, the Arizona Supreme Court upheld the constitutionality of this tax-credit scholarship program. This decision was appealed to the U. S. Supreme Court, which, in October 1999, declined to review the case. The Arizona Supreme Court ruling was allowed to stand. Kotterman v. Killian, 972 P.2d 606 (Ariz. 1999), cert. denied, 528 U.S. 921 (1999).
On April 4, 2011, the U.S. Supreme Court, in a landmark decision, upheld Arizona’s personal tax-credit scholarships, ruling that taxpayers do not have standing under the U.S. Constitution’s First Amendment Establishment Clause to challenge a tax-credit scholarship program. The court rejected opponents’ position that personal income is government property, declaring: “Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.” Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436, 179 L. Ed. 2d 523 (2011).
Original Individual Income Tax Credit Scholarship Program State Groups
That Support School Choice
Love Your School is a great resource for Arizona families looking for the best schooling options for their children. They also share the latest happenings in AZ education, families’ personal stories and more.
Empowered Arizona Families exists to give a public voice to families that utilize the Empowerment Scholarship Account program in Arizona. This organization is operated by ESA families, for ESA families.
Arizona’s Association of School Tuition Organizations (ASTOA) is the only membership organization that works solely on behalf of and provides a unified voice for Arizona’s school tuition organizations (STOs).
The Arizona Department of Revenue has approved this list of school tuition organizations to receive donations through the state’s tax-credit scholarship programs. These organizations provide private school scholarships to eligible students.