Earlier this year, the Oklahoma Legislature created the Oklahoma Parental Choice Tax Credit Program. It provides a refundable income tax credit beginning with tax year 2024 for Oklahoma taxpayers who incur expenses for a student to attend a private school or to provide home schooling. An “eligible taxpayer” includes a parent, grandparent, aunt, uncle, or “other person with legal authority to act on behalf of an eligible student.”

Expenses qualifying for the “private school tax credit” include tuition and fees paid for a student to attend a private school accredited by the State Board of Education or “other accrediting association.” The Oklahoma Tax Commission has published proposed rules that also would require private schools to initially complete a Participating Agreement. Expenses qualifying for the “home school tax credit” include a laundry list of expenditures including online learning programs and textbooks.

The credit is limited annually to $1,000 per eligible student. A student who is enrolled full-time in a public, public charter, or magnet school is not eligible. The private school tax credit is limited to the lesser of the tuition and fees for the private school or an amount based on the student’s household adjusted gross income. The largest credit available is $7,500 if the household adjusted gross income does not exceed $75,000.

The private school tax credit may not be claimed on the state income tax return but must be submitted through an online application to the Tax Commission. One application may be submitted for all eligible students in a household. The process is scheduled to begin Dec. 1, 2023. In 2024, there is a statewide limit of $150 million on credits. Applications will be processed on a first-come basis, but households with income less than $150,000 will receive priority consideration if the application is submitted before Feb. 1, 2024.

The credit will be paid to the claimant by paper check in two installments and mailed to the private school where the student is enrolled. The taxpayer is expected to endorse the payment to the school for unpaid tuition and fees.

The Tax Commission will be reporting these tax credit payments to the IRS. Consult with your lawyer or accountant regarding the taxability of the credit payments received for federal and state tax purposes.

This article appeared in the November 2, 2023, issue of The Journal Record. It is reproduced with permission from the publisher. © The Journal Record Publishing Co.