School choice: STO, tax credits raised in Iowa

Facebooktwittermail
Shane Schemmel
Iowa City Regina Elementary first-graders work on a science investigation project about air and wind. From left, Mati Kassa, Hedia Bodjona and Alice Struve do their project in Ms. Rockafellow’s classroom.

By Anne Marie Amacher
The Catholic Messenger

Supporters of the School Tuition Organization (STO) and Tuition and Textbook Tax Credit are thrilled that the Iowa Legislature expanded both programs and Gov. Kim Reynolds signed into law the measures making those changes. “We appreciate the legislature and governor supporting these opportunities to give choice in education to more Iowa parents,” said Trish Wilger, executive director of Iowa Alliance for Choice in Education and Iowa Advocates for Choice in Education.

STO

The STO program will allow a 75% tax credit and a cap statewide of $20 million. The program began in 2006 with a 65% tax credit and a cap of $2.5 million because it was for a half-year. The tax credit remained at 65 percent but the cap grew to $5 million per year in 2007, Wilger said.

epay

This is the first time the legislature raised the tax credit percentage. “This legislation also gave us the largest, single-year (cap) increase of $5 million. The cap has been increased slowly over the years. More recently the cap was $13 million in 2020, and is $15 million for tax year 2021.”

Legislators discussed various proposals and scenarios before the final vote, she said. “The 75% and $20 million scenario came out initially in a Senate bill, which went back and forth between the chambers a bit. I think we arrived at a great solution that will help many more Iowa families while easing the fundraising burden on STOs a bit.”

STOs help fund students’ tuition for accredited nonpublic schools in Iowa. “This means that more funds will be available in tuition grants for families to choose a nonpublic school if they’d like to. Schools will be able to serve more families who were previously unable to afford tuition.” The tax credit percentage “is a tremendous tax benefit for charitable giving to families in need,” Wilger said. The new tax credit cap goes into effect in tax year 2022. Funds collected in 2022 will go out as grants in 2022 or 2023, depending on when STOs distribute tuition grants.

epay

Tuition and textbook tax credit

The current tuition tax credit of 25% on the first $1,000 spent on tuition will increase to 25% on the first $2,000 spent on tuition. “Most parents will see an increase in their tax credit from $250 a year to $500,” Wilger said.

Again, legislators discussed several scenarios before the final vote. “The initial bill from the governor’s office, which was passed by the senate, called for 50% of the first $2,000 and made the credit refundable, so that parents with no tax liability would receive the benefit, as well, which would have been preferable. However, this credit amount hasn’t been increased in many years so we’re happy to see it grow and include more parents.”

Wilger said parents of students in public, nonpublic and now home schools could claim up to 25% of the first $2,000 they spend on a child’s eligible education expenses. “So for example, if a parent of three children pays $2,500 in tuition for each child, they can claim a state income tax credit of $500 for each child, for a total of $1,500 off their state income tax liability. Iowa ACE and our grassroots supporters are thrilled to see this expansion in the STO program and Tuition and Textbook Credit.”


Support The Catholic Messenger’s mission to inform, educate and inspire the faithful of the Diocese of Davenport – and beyond! Subscribe to the print and/or e-edition, or make a one-time donation, today!

Print Friendly, PDF & Email
Facebooktwittermail
Posted on