Student Funding

Parents receive a tax credit worth 25 percent of their expenditures up to a maximum credit of $250 per dependent  K–12 student. To get the maximum $250 per-dependent credit, parents must spend $1,000 in educational expenses for tuition and textbooks. They also must have a state tax liability of at least $250 because the credit is nonrefundable and, thus, cannot reduce an individual’s tax burden to less than zero. Expenses for homeschooling, tutoring, or other services outside an accredited Iowa school do not qualify for the credit.

Student Eligibility

All households with students enrolled in accredited nonprofit public or private elementary or secondary schools in Iowa are eligible.

EdChoice Expert Feedback

Iowa’s individual tax credit provides universal eligibility, a positive attribute in any school choice program. However, the $250 credit is very small compared to the costs of private school tuition and covers a maximum of only 25 percent of expenditures. To increase the opportunities for choice, the Iowa program could mirror the Alabama tax credit program by increasing the size and value of the credit and making the credit refundable for low-income families. That would increase the funding power of the program and more closely align student funding with the per-pupil spending in Iowa’s public schools.

Rules and Regulations

• Income Limit: None
• Prior Year Public School Requirement: None
• Geographic Limit: Statewide
• Enrollment Cap: None
• Credit Value: 25% (on up to $1,000 in qualifying expenditures)
• Taxpayer Credit Cap: $250
• Testing Mandates: None

Parent Requirements:

• Must spend at least $1,000 in educational expenses, including tuition and textbooks, for each dependent attending an accredited or approved nonprofit elementary or secondary school
• Must have a state tax liability of at least $250

Governing Statutes

Iowa Code § 422.12

Legal History

On March 17, 1992, the U.S. District court for the Southern District of Iowa held that Iowa’s newly enacted Tuition and Textbook Tax Credit program was constitutional. Citing a previous ruling, Mueller v. Allen, 463 U.S. 388, 103 S. Ct. 3062, 77 L. Ed. 2d 721, 1983 U.S. 96, upholding Minnesota’s Education Tax Deduction, the court ruled that Iowa’s tax credit for private school educational expenses does not violate the Establishment Clause of the First Amendment to the United States Constitution. Luthens v. Bair, 788 F. Supp. 1032 (S.D. Iowa 1992).