Iowa increases tax-credit scholarship cap, helps more students access their school of choice

Our neighbor to the south gets it: tax credit scholarships help remove the financial barriers that prevent students from accessing the learning environment that’s right for them.

Iowa’s School Tuition Organization Tax Credit program, which helps students from low- and middle-income households afford the schooling options that best fit their needs, received a 15 percent increase in its tax credit cap, according to an article by Cassidy Syftestad in The Heartland Institute’s School Reform News.

Iowa taxpayers who donate to school tuition organizations (STOs)—nonprofits that provide private school scholarships—receive a credit on individual income taxes worth a percentage of the donation’s value. In Iowa’s case, 65 percent of the total contribution. The credit is also limited by a statewide cap, which Iowa’s legislature and governor approved increasing from $12 million to $15 million beginning in 2020.

With the higher cap, STOs will be able to fund more scholarships.

“In 2018 and years prior, where we had a $12 million cap, the STO program was able to serve just under 11,000 students,” [Iowa Alliance for Choice in Education Executive Director Trish] Wilger said.

“Based on that history, with a cap of $15 million in 2020, we project that the STO program could serve approximately an additional 2,000 to 3,000 students, which makes significant progress in meeting the needs of those waiting for assistance,” Wilger said.

Even with the increase, Iowa should next consider an automatic escalator for the tax credit cap so the program can continue to grow as demand for these scholarships increases, according to EdChoice. “This will allow true educational freedom for all families who seek a different choice, not create an arbitrary cap that stops those who would wish to attend a different school.”

During the last legislative session, Minnesota had its own tax credit scholarship proposal on the table but failed to approve it. Opportunity Scholarships would have helped more Minnesota families access quality school options, and in light of the state’s persistent education shortcomings, the program would have helped serve students most in need of new learning opportunities.

Governor Walz has pledged to plug gaps in education and address the discrepancies in academic achievement. But this vision is not possible until more Minnesota students have access to a school that serves them best, whether that’s a traditional public school, charter school, private school, religious school, or even homeschool.