Student Funding

Use of Funds
Parents may receive tax credits for the cost of transferring students to private schools to cover tuition costs and any mandatory fees.

Funding Amount and Source
Parents receive a tax credit worth the lesser of (1) 80% of the average annual state cost of attendance for a K–12 public school student during the applicable tax year, or (2) their student’s actual cost of attending school. If the taxes owed by the parents are less than the total credit allowed, they may receive a rebate equal to the balance of the unused credit. The Alabama Department of Revenue funds any rebates from an appropriation of sales tax revenue in the Education Trust Fund. Alabama students may increase their scholarship value by taking advantage of both the Education Scholarship Program and this program. The sending public school keeps the remaining 20% of state funding in addition to any local or federal money associated with the cost of educating the transferring student.

(Last updated July 15, 2024)

Student Eligibility

Eligibility for the program is characterized by the enrollment in, or assignment to attend, a priority school. Alabama defines a public school as priority if it meets one or more of the following requirements: (1) The school is designated as a priority school by the state Superintendent of Education, or (2) the school does not exclusively serve a special population of students and has received a D or an F on the most recent state report card. A student qualifies if they attended a priority school the prior school year; the student was assigned to a priority school for the upcoming year but previously attended elsewhere in the Alabama public school system; or the student was notified of assignment to a priority school for the next school year. Families may transfer students to public schools outside the assigned priority school zone or attend a nonpublic school to receive the credit. A student enrolled in the Department of Youth Services School District is not permitted. The student is eligible for the grade levels of the assigned priority school, even if the letter grade improves during the student’s enrollment or assignment.

(Last updated July 15, 2024)

EdChoice Expert Feedback

The most glaring weakness of Alabama’s individual tax-credit program is its eligibility restrictions. Instead of basing participation on whether an entire school is “priority,” as measured by an arbitrary, dynamic state metric, participation should be permitted whenever a parent determines a child’s educational needs are not being met at the current school. Only about one in 20 students in the state can take advantage of the credit because of these restrictions. Alabama also should consider amending this program to allow more money to follow participating students. The amount of money parents receive through Alabama’s credit is less than the average funding parents receive through private school choice programs in other states. The credit is worth up to 80 percent of what the state spends per student. Despite these funding shortfalls, eligible Alabama students may take advantage of both the Education Scholarship Program and this program, increasing their scholarship value. However, few families are taking advantage of that opportunity. The sending public school keeps the remaining 20 percent of state funding in addition to any local or federal money associated with the cost of educating the transferring student. An effective next step would be to enable banks to give tax anticipation loans to parents who cannot front the money to pay for tuition, allowing more students to access schools of choice. An even greater step for Alabama is to allow all the state money to follow the child to his or her school of choice. (Last updated December 14, 2023)

Rules and Regulations

Program Guidelines

• Income Limit: None
• Prior Year Public School Requirement: Yes (Families must show a cost of transfer from a priority public school to a qualifying public school or a private school. Families may continue to receive the tax credit or rebate until the student reaches the highest grade level of the priority public school they are zoned to attend.)
• Enrollment Cap: None
• Credit Value: 100%
• Taxpayer Credit/Deduction Cap: Lesser of tuition or 80% state average
• Testing Mandates: State test or nationally norm-referenced tests
• Special Needs Pathway: None
• Participant and Family Guidelines
• Education Requirements: The student was enrolled in or assigned to a “priority“ school
• The student was transferred to a “qualifying” public or private school

Miscellaneous

• Provide proof of the cost of attendance at the qualifying public or private school
• Parent Supplemented Funds/Scholarships: Allowed

(Last updated December 18, 2024)

Governing Statutes

Ala. Code §§ 16-6D-8

(Last updated December 14, 2023)

Legal History

Both state and federal challenges to this program were successfully defeated. 

On April 8, 2014, a U.S. District Court judge dismissed a claim brought by the Southern Poverty Law Center challenging the Alabama Accountability Act on grounds the school choice program violated equal protection C.M., et al., v. Robert J. Bentley, M.D. et al., 13 F.Supp.3d 1188 (N.D. Ala. 2014).   

On March 2, 2015, the Alabama Supreme Court ruled, in an 8-1 decision, that the Alabama Accountability Act enacted in 2013, which includes Alabama’s refundable tax credit and tax-credit scholarship program, is constitutional. The high court overturned a May 2014 lower court ruling by the Montgomery County Circuit court which initially struck down the Alabama Accountability Act. Magee v. Boyd, 175 So.3d 79 (Ala. 2015).  

(Last updated December 6, 2023)