For the past five years, Ohio taxpayers have received a state tax credit when they donate to private K-12 schools that offer student scholarships. The credit reduces taxable income dollar-for-dollar, up to $750 or $1,500 for couples filing jointly.
Those are funds that would otherwise go into Ohio's General Fund to be used for public education, health care and other human services.
While other states, including Indiana, have similar programs, Ohio has been a leader and has helped create momentum for a new federal program.
U.S. Treasury Secretary Scott Bessent will visit Columbus Oct. 16 to discuss the new program's rollout Jan. 1.
Called the Education Freedom Tax Credit, it will be the first federal tax credit supporting private contributions for
K-12 scholarships.
According to the Department of Treasury, eligible taxpayers may claim an annual credit of up to $1,700 for qualifying contributions to Scholarship Granting Organizations (SGOs), or up to $3,400 for married couples filing jointly.
A taxpayer cannot receive both state and federal tax credits for the same donation, or receive more than the original donation value.
SGOs use the contributions to provide scholarships for qualified education expenses, including tuition, academic tutoring, special-needs services, books, supplies, computers, and other educational supports.
Policy Matters Ohio is not a fan of such programs, arguing that lawmakers who created the credit program "did not limit how much the state could spend on it; that amount could increase indefinitely, diverting more and more revenue away from Ohio’s (general fund)," according to a report issued this year by the progressive policy research institute.
"We would encocurage the state to collect enought revenue to fully fund public schools, which is its constitutional responsibility," said Madelaine Matej MacQueen, Policy Matter's budget researcher. In 2024, almost 31,000 tax filers claimed the credit, amounting to $35.5 million in revenue diverted from the state's general fund.
The IRS has forecast $26 billion in foregone revenue to the federal treasury, Matej MacQueen said.
And almost 80% of recipients of the full credit in 2024 earned more than $100,000 in family income.
Bessent will be meeting with Sen. Jon Husted and other leaders for a roundtable discussion about how the credit will expand educational opportunities, empower parents, and help families choose the learning options best suited to their children’s needs. The discussion will also address the Working Families Tax Cuts Act’s expansion of the Adoption Tax Credit.
Growth and development reporter Dean Narciso can be reached at dnarciso@dispatch.com.
This article originally appeared on The Columbus Dispatch: Ohio private school tax break leads the way for federal scholarship program
