Virginia Education Improvement Scholarships Tax Credits
According to Virginia’s new Education Improvement Scholarships Tax Credits program, donations to approved foundations will provide scholarships for low-income new students at non-public schools. Individual or business donors then receive a 65% Tax Credit. Virginia has allocated $25 million in tax credits for each year of the program, which will continue until January of 2028.
The Compassion Foundation has been approved by the Virginia Department of Education to receive donations under this program, and to distribute scholarships to qualifying students who attend one of the Virginia private schools accredited by the Association of Christian Teachers and Schools (ACTS).
– Important Points
- Minimum donation is $500 per year
- Maximum donation is $125,000 per year for individuals and married couples
- Individuals can use the Tax Credits against their Virginia personal income tax liability
- No dollar limit on donations for businesses
- Businesses may claim the credit against
- Virginia Corporate Income Taxes
- Virginia Bank Franchise Tax
- Virginia Insurance Premiums License Tax
- Virginia Public Service Corporations Tax
- Personal Income Taxes via pass-through entities such as S-Corporations, LLCs and Partnerships.
The amount of the Tax Credits may not exceed the donor’s tax liability for the year in which the credit is claimed, but Tax Credits may be carried over for up to five succeeding years.
In addition to a 65% Tax Credit, individuals and businesses may also receive a deduction for a charitable contribution, and therefore achieve tax savings in two ways:
- Deductions against taxable income as a charitable donation on both federal and state income taxes.
- The tax reduction equals the contribution amount times the tax rate of the applicable tax (federal or state).
- Subject to rules governing deductibility of charitable contributions
- Credit against Virginia taxes.
- Tax reduction equals 65 percent of the amount of the donation.
- Credit is non-transferable.
IMPORTANT: Consult your tax advisor to determine your specific tax savings.
– Eligible Students
- Children receiving these scholarships must come from families whose annual household income is less than 300 percent of the current poverty guidelines.
- For children with disabilities, the family’s household income must be no more than 400 percent of the poverty level.
- In addition, the children must be residents of Virginia, and fit one of these criteria:
- are eligible to enter kindergarten or first grade, OR
- attended a Commonwealth public school for at least half of the current or prior school year, OR
- were not Virginia residents during the preceding school year, OR
- were prior recipients of a scholarship under this program.