Student Funding

Use of Funds

Funds from STO scholarships are used to pay for tuition at qualified private schools for full-time enrollment.

Funding Amount and Source

Private donors fund this program by donating to STOs receiving tax credits for their donation, up to certain limits. STOs determine scholarship amounts. These amounts may vary depending on the STO to which a student applies for a scholarship. Students may receive more than one scholarship from STOs. Scholarship values are capped at the school’s tuition but multi-year tuition scholarships are permitted, and scholarships can be combined. Tax credits are worth 100% of the value of the contributions to the scholarship organizations. In tax year 2024, individual taxpayers who contribute to STOs may claim a dollar-for-dollar credit of up to $731, and married couples filing jointly may claim up to $1,459. The credit limit is adjusted annually, on or after January 1, using the Consumer Price Index published by the United States Bureau of Labor Statistics, except that the dollar amount cannot be reduced from the prior taxable year. This credit is not available to corporations.

(Last updated July 15, 2024)

Student Eligibility

Any student attending a private school grades K–12 is eligible to receive a tax-credit scholarship in Arizona’s Original Individual Income Tax Credit Scholarship program. Pre-kindergarten students with disabilities are eligible if attending a qualified school that offers needed services for any of the following conditions: hearing impairment; visual impairment; developmental delay; preschool severe delay; or speech and/or language impairment. Taxpayers may not make STO contributions earmarked for their own dependents. To be eligible, kindergarten students must be age 5 by January 1 of their kindergarten school year. Students must attend the private school full-time to participate. A student who receives Empowerment Scholarship Account (ESA) money from the Arizona Department of Education is not eligible for an original individual tax-credit award. Students may receive multiple tax-credit scholarship awards or receive awards from multiple tax-credit scholarship programs as eligible.

(Last updated July 15, 2024)

EdChoice Expert Feedback

Arizona’s original individual-donor tax-credit scholarship program—the first in the nation—helps tens of thousands of students access schools that are the right fit for them, but policymakers could do more to expand educational opportunity. All students are eligible to receive a tax-credit scholarship, making this among the most expansive educational choice programs in the nation. Statewide, less than 10 percent of students participate in one of Arizona’s private educational choice options (including the Low-Income Corporate-Donor Tax-Credit Scholarship Program, the “Switcher” Tax-Credit Scholarship Program, Lexie’s Law for Disabled and Displaced Students Tax-Credit Scholarship Program, and the Empowerment Scholarship Account Program). The average scholarship size is only about $2,000, which is about 20 percent of the average expenditure per student at Arizona’s district schools, but there is no cap on scholarship values and students may receive multiple scholarships. Students with special needs, students in foster care, students from low-income families, and those who have switched from the public school system can also receive scholarships via the other tax-credit scholarship programs. Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but donors may only claim up to $731 in tax credits annually (or up to $1,459 for married couples filing jointly). To expand access to educational choice, Arizona policymakers should increase the amount of tax credits that individual donors can receive. Arizona’s scholarship program generally avoids unnecessary and counterproductive regulations. (Last updated December 14, 2023) 

Rules and Regulations

Program Guidelines

• Income Limit: None
• Prior Year Public School Requirement: None
• Geographic Limit: Statewide
• Enrollment Cap: None
• Scholarship Cap: Tuition of a qualified private school
• Testing Mandates: None
• Credit Value: 100%
• Per Donor Credit Cap: $731 (individual) / $1,459 (married)
• Total Tax Credit Cap: None
• Special Needs Pathway: Pathway (pre-k)

Participant and Family Guidelines

• Education Requirements: N/A
• Parent Supplemented Funds/Scholarships: Allowed
• Miscellaneous: May not earmark or trade STO contributions for dependents

Education Provider Guidelines

• Accreditation/Approval: State or regional
• Employment Standards: Background checks
• Nondiscrimination: Comply with applicable state anti-discrimination laws
• Calendar/Curriculum/Attendance: N/A
• Financial: N/A
• Miscellaneous: N/A

Scholarship Organization (STO) Guidelines

• Scholarship to Contribution Ratio: Use at least 90% of contributions for scholarships
• State Reporting: Report annually to the state:
  • Data on accepted contributions, grants awarded, the dollar amount of scholarships granted to students who qualify for the free or reduced-price lunch program, and the dollar amount of scholarships granted to those students whose household income falls between meeting the economic eligibility requirements for FRL and 185% x FRL
  • The amount of money being held for identified student scholarships in future years, a list of participating schools with the number and dollar amount of scholarship awards received
  • The salaries of the STO’s top three officials for the fiscal year
  • Proof of independent review of financial statements by a certified public accountant
• Financial: CPA audit
• Award Priority: Financial need
• Miscellaneous
  • Make scholarships available for more than one school
  • May allow donors to recommend student beneficiaries but shall not award, designate, or reserve scholarships solely on the basis of donor recommendations
  • Cannot exchange recommendations of student beneficiaries with other donors

(Last updated December 12, 2024)

Governing Statutes

Ariz. Rev. Stat. §§ 43-1089; 43-1601 through 1605

(Last updated July 15, 2024)

Legal History

On January 26, 1999, the Arizona Supreme Court upheld the constitutionality of this tax-credit scholarship program. This decision was appealed to the U.S. Supreme Court, which, in October 1999, declined to review the case. The Arizona Supreme Court ruling was allowed to stand. Kotterman v. Killian, 972 P.2d 606 (Ariz. 1999), cert. denied, 528 U.S. 921 (1999)   

On April 4, 2011, the U.S. Supreme Court, in a landmark decision, upheld Arizona’s personal tax-credit scholarships, ruling that taxpayers do not have standing under the U.S. Constitution’s First Amendment Establishment Clause to challenge a tax-credit scholarship program. The court rejected opponents’ position that personal income is government property, declaring: “Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.” Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436, 179 L. Ed. 2d 523 (2011) 

(Last Updated July 15, 2024)