Iowa Tuition and Textbook Credit: Dealing with Private School Expenses

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

Iowa offers a tax credit called the “tuition and textbook credit” for expenses relating to dependents who are in grades K-12.

The credit is 25% of the first $1,000 of expenses per dependent. The list of qualifying expenses is surprisingly long and taxpayer-friendly. It includes typical expenses such as tuition, but also includes things such as activity tickets and even tickets to prom (but not prom dresses or tuxedos).

Now, what about tuition paid to a private religious school? For a very long time, I told my clients that the answer was no. The law (and published guidance from Iowa Department of Revenue) says tuition paid to schools that teach religious doctrines is not counted toward the credit.

Turns out, I was wrong.

(Yes, I do sometimes make mistakes, and I’m not afraid to blog about my mistakes.)

One of my clients sends her kids to a Catholic school where the principal was one of the people who helped push for the credit many years ago. When I told her the tuition wasn’t included as part of the credit, she asked the principal … who said I was wrong.

So I checked with Iowa Department of Revenue.

Turns out, the tuition is indeed includable … as long as the taxpayer can separate out the portion of tuition that is for general education vs. the portion that goes towards teaching religious doctrines.

So for example, if a taxpayer can show that 75% of the education time at the school is for general education, then 75% of the tuition would count toward the credit.

In my defense, the way the law is written and the way the IDR guidance is written make it sound as if NOTHING counts toward the credit if the kids are being sent to a school that teaches religious doctrines. In fact, that seems to be the only conclusion to draw from the way the state words the rules. So while I normally don’t like when clients question me, this is one case where I’m glad a client challenged me.