How To File A State Tax Credit For Tuition

Filing a state tax credit for tuition depends on the state in which you reside and whether or not they permit a tax credit. The requirements for tuition tax credits vary from state to state so the standards are different. In a general or generic sense filing a state tax credit for tuition, if available, is the same process as any other tax credit that a state makes available to its residents.

States Offering Tuition Tax Credits

The following states offer tuition tax credit programs: Arizona, Florida, Illinois, Iowa, Minnesota, Pennsylvania and Rhode Island.  Residents of other states are currently without a tax credit for tuition program so this information would not be applicable to them.  The requirements and qualifications for the programs vary and can apply to K-12 programs as well as higher education.

Arizona Tuition Tax Credit Example

As an example, Arizona offers 2 programs, the Arizona Corporate School Tuition Organization Tax Credit and Individual School Tuition Organization Tax Credit.  The Arizona Corporate School Tuition Organization Tax Credit was started in 2006 and provides vouchers to qualified families for their children to attend private STOs.  The number of students receiving vouchers under the program is nearly 4,600.  The average amount is $4,200 for students attending K-8 and $5,000 for 9-12 students.

The Individual School Tuition Organization Tax Credit is similar to the Arizona Corporate School Tuition Organization Tax Credit program, serving the needs of 25,000 students.  The STOs set the eligibility requirements for qualified students and the average grant is around $1,370.

Claiming the Arizona Tuition Tax Credit

Parents who are looking to claim the credit for either of these programs must file Form 323.  The credit is applied against an Arizona resident taxpayer’s tax liability and is not given as a refund or cash directly to the taxpayer. Form 323 is filed with the Arizona state income tax return in the year that the taxpayer wishes to claim the tuition tax credit.

The Effect of Tax Credits

This example illustrates the way in which the 7 states that offer tuition tax credits handle the process of claiming the credit.  A credit, regardless of whether it is a federal or state tax credit, is a below the line reduction of a taxpayer’s tax liability.  In other words, credits are used to reduce the amount of income that a taxpayer has to pay taxes.  In that sense, a credit is like a refund (or pre-refund) of monies that used to benefit the qualified individual.

Contacting Your State Tax Department

The other states have a similar process for claiming tuition tax credits, depending on the program qualifications, requirements and process for filing state income tax returns.  A resident of Arizona, Florida, Illinois, Iowa, Minnesota, Pennsylvania and Rhode Island should contact their state tax or revenue department for information concerning the required filing forms for claiming a tuition tax credit.