The Iowa School Tuition Organization Tax Credit

Image courtesy of user Nemo on
Image courtesy of user Nemo on

The School Tuition Organization Tax Credit is one of many tax credits available to claim under special circumstances on an Iowa tax return. Questions about this credit come up occasionally.

Let’s start by defining what a “School Tuition Organization” is:

A school tuition organization must be a charitable organization in Iowa that is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code that allocates at least 90% of its annual revenue in tuition grants for children who reside in Iowa to allow them to attend a qualified school of their parents’ choice. The contribution cannot be used for the direct benefit of any dependent of the taxpayer or any other student designated by the taxpayer….

The school tuition organization must represent more than one school, and they can only provide tuition grants to eligible students who are members of households whose annual income does not exceed an amount equal to three times the most recently published federal poverty guidelines published by the U.S. Department of Health and Human Services.

From the expanded online instructions to the Iowa Form 1040 available online at the Iowa Department of Revenue website.

STOs provide scholarships to parents who want to send their kids to a private school for K-12 education. The tax credit is equal to 65% of the donation to the STO.

Each year the state determines the cap for the amount of credits that can be issued. Currently the cap is $14 million.

If you donate to an STO, they’ll give you a certificate showing the amount of credit you’re eligible for. The certificate will show a certificate number on it, which must be put on your tax return in order to claim the credit.

You can find more information about the STO credit, and STOs in general, at this website.