Minnesota Expands Education Tax Credits

Published July 1, 1999

When Minnesota Governor Jesse Ventura signed the state’s 1999 tax bill into law in late May, he endorsed a significant expansion of the state’s education tax credit program that will add an estimated 35,000 eligible families to the program.

Effective with the current tax year, some 30,000 families with incomes between $33,501 and $37,500 may now claim the credit. Another 5,000 custodial parents who pay their child’s education expenses may now claim a credit or a deduction under the program, even if their divorce decrees deny them the right to claim their child as a dependent.

“The Legislature’s approval of an education tax credit expansion represents real progress for Minnesota’s first-in-the-nation statewide school choice program,” said Dr. Mitch Pearlstein, chairman of Minnesotans for School Choice. “This is concrete evidence that the education tax credit program is receiving bipartisan support and acceptance.”

The education tax credit, originally enacted in 1997, can be used to offset the cost of certain expenses incurred in the education of K-12 students in public, private, and home schools–including religious schools. Qualifying expenses include tutoring, after-school or summer academic programs, music lessons, and back-to-school supplies.

Under the terms of the 1997 legislation, an education tax credit of up to $1,000 per child and $2,000 per family was available only to families with incomes of $33,500 or less. In the 1999 omnibus tax bill, legislators included a graduated eligibility “phase-out” for families with incomes up to $37,500. Families earning $33,501-$34,500 now can claim a tax credit of up to $750 per child; those earning $34,501 to $35,500 can claim up to $500 per child; and so on, until the credit is phased out completely for families earning $37,501 and up.

“By providing an income limit ‘phase-out’ for the education tax credit, the Legislature has stopped penalizing low-income families which modestly increased their earnings,” said Pearlstein.

Information on 1998 tax returns from the state Department of Revenue indicates that not all eligible families are taking advantage of the education tax credit, and Pearlstein urged “schools, nonprofit organizations, and the media to help inform lower-income parents of this important tool for becoming more involved in their children’s education.”

For more information …

A three-page summary of the 1997 Minnesota K-12 education reform bill, is available through PolicyBot. Point your Web browser to http://www.heartland.org, click on the PolicyBot icon, and search for old document #2184618.