Official: Tennessee school vouchers are federally taxable income

Tennessee’s education commissioner says the state’s new school vouchers for private education will be considered federally taxable income for parents. (Image: Pixabay)

Tennessee’s education commissioner says the state’s new school vouchers for private education will be considered federally taxable income for parents.

After confirming the requirement to lawmakers Monday, Commissioner Penny Schwinn told reporters the Board of Education, attorney general’s office and program rulemaking officials helped make the determination.

Schwinn said officials will have to examine the taxable income of families as a result, given income limits to receive vouchers worth up to $7,300 annually.

Participating families cannot exceed twice the federal income eligibility for free school lunch.

The law says the vouchers “do not constitute income of a parent of a participating student” under Tennessee law. That doesn’t affect federal taxes.

Gov. Bill Lee’s administration is hoping to begin the program next year. It’s currently limited to Shelby and Davidson counties - with schools in Hamilton County being taken out of the proposal prior to its approval.

"We're hopeful that it will be in place this next cycle and we won't compromise quality if it's not ready for high-quality delivery," Lee told reporters on Nov. 8, "The plan is that we will be."

Currently, schools get a certain amount of funding based on student enrollment. The concern had been that under the education savings account program, students who leave public school districts to participate in the voucher program would take that funding with them.

But just before the 2019 session ended, lawmakers agreed to allow participating public schools to continue to be fully reimbursed for losing students. Schwinn's $15.1 million budget request is needed to fully reimburse those participating schools.

To help with that implementation process, education officials have contracted with Nashville-based design firm Circa to handle web development and materials design. The state has hired a part-time contract staffer who will be paid $50,000 over the next few months to help with the project, according to documents recently obtained through a public records request by The Associated Press.

Furthermore, the state has already drafted administrative rules for the program — which provide the guidelines to how the state will enforce the law — but those still need final approval by the State Board of Education.

Nationally, five states have passed laws allowing some sort of education savings accounts: Arizona, Florida, Mississippi, Tennessee and Nevada. The Nevada Supreme Court later ruled the state could not use school dollars to fund the accounts.

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