Student Funding

Use of Funds 

Scholarships may be used to cover all or part of the tuition and fees at a qualifying school. 

Funding Amount and Source 

The average value of all scholarships awarded by SGOs may be worth up to 82.5% of the state’s share of the per-pupil allocation ($4,956 in 2020–2021), although SGOs otherwise have discretion to determine scholarship amounts based on variables such as grade level and family income. Scholarships may be used for tuition and fees at qualifying schools. Tax credits from donors are worth 100% of the value of the contributions to scholarship organizations. Total credits claimed cannot exceed $5 million, meaning roughly 2,500 students can participate, or about 1% of South Dakota’s K–12 student population. 

(Last updated July 18, 2024) 

Student Eligibility

Students whose family incomes do not exceed 150% of the federal Free and Reduced-Price Lunch (FRL) program ($86,580 for a family of four in 2024–2025) qualify for the program. Once a student has received a scholarship, that student remains eligible for three years; or if the student is entering high school, until high school graduation, regardless of income. After the initial period of income eligibility, scholarship students remain eligible if their family income in the prior year does not exceed 200% of the FRL program (115,440 for a family of four in 2024–2025). Starting in 2023, students in foster care are now eligible, regardless of income. 

(Last updated July 18, 2024) 

EdChoice Expert Feedback

South Dakota’s tax-credit scholarship program helps over a thousand students access schools that are the right fit for them, but policymakers could do more to expand educational opportunity. Eligibility for the scholarships is limited to 277.5 percent of the federal poverty line ($83,250 for a family of four in 2023-24). About half of South Dakota students are eligible for a scholarship and less than one percent of students statewide actually use a scholarship. The average scholarship size is about $1,729, which is only about 20 percent of the average expenditure per student at South Dakota’s district schools, though the cap on scholarship values is somewhat higher (82.5 percent of the state’s share of the per-pupil allocation, or about $5,000 in 2020-21). Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but only $3.5 million in tax credits are available annually, which is equivalent to less than one percent of South Dakota’s total K-12 revenue. To expand access to educational choice, South Dakota policymakers should dramatically increase the available tax credits and expand eligibility to all students (prioritizing scholarships based on need). The program could also be converted into an education savings account to ensure that all students have access to the education that’s the right fit for them, whether private school or a customized course of education. South Dakota’s scholarship program generally avoids unnecessary and counterproductive regulations. (Last updated December 14, 2023) 

Rules and Regulations

Program Guidelines

• Income Limit: 150% x FRL (Exception for Foster Care Students)
• Prior Year Public School Requirement: None
• Enrollment Cap: None
• Scholarship Cap: 82.5% state funding
• Testing Mandates: State test or nationally norm-referenced tests, parent-directed
• Credit Value: 100%
• Per Donor Credit Cap: Tax liability excluding fire premium and workers’ compensation
• Total Tax Credit Cap/Budget Cap: $5 million
• Special Needs Pathway: None

Participant and Family Guidelines

• Click Here for the Program Administrator’s Parent Handbook
• Education Requirements: Enroll in qualified school/State or nationally normed assessment
• Parent Supplemented Funds/Scholarships: Allowed
• Miscellaneous: N/A

Education Provider Guidelines

• Accreditation/Approval: State
• Employment Standards: N/A
• Nondiscrimination: Federal
• Calendar/Curriculum/Attendance: N/A
• Financial: N/A
• Miscellaneous: N/A

Scholarship Organization Guidelines

• Scholarship to Contribution Ratio: Use at least 90% of contributions for scholarships
• State Reporting:
  • Data on contributing companies
  • Data on accepted contributions
  • Data on scholarships awarded and funded, including the amount awarded to students who qualify for the FRL program and the percentage of first-time scholarship recipients who were enrolled in a public school the previous year
• Financial: CPA Audit
• Award Priority: Renewing students
• Miscellaneous:
  • Use all revenue from interest or investments for scholarships
  • Carry forward no more than 25% of its revenue from contributions from one fiscal year to another
  • Ensure scholarships are portable during the school year and can be used at any qualified school that accepts the eligible student
  • Verify annually that schools that accept scholarship students are accredited by the state department of education
  • Provide a state approved receipt to companies for contributions made
  • Notify the state of its intent to provide scholarships
  • Provide to the state proof of 501(c)(3) status
  • Conduct background checks on employees and board members
  • Maintain a board that consists of at least five members, each of whom must be a resident of the state
  • Maintain and staff a physical location in the state to meet with and provide service to qualifying schools

(Last updated September 27, 2024)

Governing Statutes

S.D. Codified Laws §§ 13-65-1 through 12 

(Last updated September 27, 2024) 

Legal History

No legal challenges have been filed against the program.

(Last updated September 27, 2024)