Update on Georgia School Choice Scholarship Fund

Last year, I wrote about the Georgia School Choice Scholarship Fund program.

This program allows Georgia individual taxpayers and businesses to redirect their state income tax dollars (up to a limit) to eligible private schools. The private school will receive the redirected money as a donation to its scholarship fund and will disburse it to its eligible students. The true intent of the program is to level the playing field for middle-class families who wouldn't otherwise be able to afford to send their kids to private schools. Georgia taxpayers can claim $52.5 million in tax credits for donations to scholarship organizations on a first-come, first-served basis. You can also have your friends and family donate the money.

When you participate in this program, your child gets a scholarship award from the school, depending on school's discretionary criteria for need base scholarships. PLUS, you get a tax deduction on your federal income tax return if  you itemize your deductions AND your entire donation back from the state of Georgia in the form of qualified educational expenses credit. It is a win-win for the school, the child, and you, the taxpayer.

In 2012, I donated about $2500, the maximum a family can donate when you file your taxes married filing jointly. I just completed my 2012 tax returns.

Here is the math on how good this program is.

Amount donated in 2012: $2500

Deduction on federal income: $2500

Taxes saved on federal income: $625 (@25% income tax bracket)

ROI/year: 25%

In essence, by spending $2500 up front a year earlier, we earned $625. This is the money that we'll put towards our daughter's tuition at this private school where we are redirecting it.

Another great feature of this program is that any Georgia resident can redirect their tax dollars to the private school of their choice. So, if you are a parent with a child in the private school, you can ask your friends and family to participate in this program. The private school will get more money to award scholarships to the needy students. In return, they will get deduction on their federal income taxes as a charitable donation AND dollar for dollar credit back for their entire donation from the State of Georgia. Again, it is a win-win.

Programs like these make private schools affordable for everyone.