What is the Federal Scholarship Tax Credit?

Scholarship Tax Credit: What are they talking about?

The Federal government recently passed the first scholarship tax credit, which provides every taxpayer with a tax credit, and opens educational opportunity for all students in the DMV and the nation.

But, what is the tax credit? And how does this work? Individual taxpayers can receive a dollar-for-dollar tax credit against their federal income tax for donations (up to $1,700 per year) made to K-12 scholarship granting organizations (SGO). How does the tax credit work?  Let’s say you are working on your tax return and find you owe the government $2,000.  You can write a check to an SGO for $1,700 and another to the IRS for $300; you would then claim the $1,700 as a credit against the $2,000 owed, and then pay the IRS the remaining $300 owed.  You can claim the credit even if you itemize.

Scholarship-granting organizations must use the authorized donations to provide scholarships for tuition, tutoring, special needs, supplies/technology, as well as for many other education expenses for both public and private school students.  So, even if you have a tax bill of $500, if you believe in education, this is something you might consider.

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Learn more here.

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