Wisconsin Becomes 6th State to Add Tax Break for Private School Tuition

Monday, June 24, 2013 at 2:26 PM by

A new tax break for private school tuition will make Wisconsin one of six states that offer broad-based tax benefits for parents who pay for private school tuition.

The new tax benefit is included in the state budget that Governor Walker is expected to sign in the next week or so. The budget bill gives Wisconsin parents a tax deduction of up to $10,000 per child each year for private school tuition. Any tax filer, no matter how high his or her income, is eligible for this deduction. The deduction for private school tuition is expected to reduce Wisconsin tax revenue by $30 million a year, beginning in tax year 2014. You can read more about the tax break in our June 12th blog post, “Generous New Tax Break for Private School Tuition out of Line with Existing Tax Benefits.”

Once the budget is passed, Wisconsin will become the 6th state with broad-based direct tax benefits for parents who pay private school tuition. The chart below shows the other states with similar tax breaks, and the maximum tax benefit in each state. In addition to the states shown in the table below, Alabama and North Carolina offer tax benefits for a narrower subset of parents who pay private school tuition. Some other states, which we did not include in the table below, allow businesses and individuals to receive tax credits for contributing to a fund that goes toward paying tuition for children to attend private schools. The information in this post on tax benefits in other states comes from The Friedman Foundation for Educational Choice.

Comparing the value of Wisconsin’s tax benefit to those in other states is tricky, because it is difficult to make apples-to-apples comparisons among different types of tax benefits. Keeping that caveat in mind, it appears that Wisconsin’s new tax benefit could be the most generous of the states that offer similar measures. Here are some ways to make comparisons among the tax benefits offered by Wisconsin and other states:

  • Wisconsin allows a maximum deduction of $10,000 per child for private school tuition, which is considerably higher than the maximum amounts in other states that offer deductions. Different income tax rates among states can affect the tax benefit offered by deductions.
  • A married couple in Wisconsin earning $400,000 would receive a maximum tax benefit of $760 per child for private school tuition. (Keep in mind that not all parents would receive that amount; parents earning less would receive smaller benefits, and some low-income parents who pay tuition would receive no benefit at all from this tax break.) That amount is higher than the credit amounts shown in the table below.

One notable difference between Wisconsin’s new tax benefit and similar measures in other states is that Wisconsin limits its tax benefit to private school tuition, and does not provide tax breaks for educational expenses incurred for attending public schools. In some other states, such as Illinois, Iowa, Louisiana, and Minnesota, expenses such as activity fees or material fees incurred by students attending public schools are also eligible.

Tamarine Cornelius

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