For Parents
ESAs are Taxable Income … Death Knell for S 556?
We have been preaching this for years now … ever since the “paid” special interest advocates pushed for a direct refundable parental tax credit … these payments are likely TAXABLE INCOME!!!
This week the Republican Attorney General & Republican Commissioner of Education found that the newly passed Education Savings Account (ESA) program in Tennessee would be TAXABLE INCOME to the parent recipients. (NOTE: Although the Tennessee ESA is currently the law, it was a major debacle getting it passed. It won by one vote, a Republican that only voted yes if they promised to keep ESAs OUT of his district … so the program is only in 2 out of 95 counties in TN and the school districts get reimbursed 100% for each kid that leaves … so the state is paying DOUBLE for those kids in the program … so it wasn’t “really” passed and like Nevada, our bet is it will be killed before it is ever implemented – costing taxpayers millions in the process.)
But you don’t have to take our word for it … watch and read the articles yourself.
Reporter Richard Ransom asks …. “Were lawmakers mislead? Were they lied to?” Our experience … YES!!!
The IRS rules are pretty simple … if you get a check from state government … you must provide that person with an IRS Form 1099-G … period!!!
What does this have to do with South Carolina? Well, do you get a refundable parental tax credit? Well, is that taxable income? We think it is … and that is why we opposed it. SC legislators can make the payment free from SC state income tax … but they have NO influence on making it FEDERALLY tax free. That is the reason NO OTHER STATE IN THE NATION has such a large refundable parental tax credit. Others states are not stupid … they know (like Tennessee has figured out) that these direct payments from state government is a tax problem. There are a few states with small $100 or $200 refundable education tax credits … and yes they are taxable too … but that is nothing like an $11,000 refundable parental tax credit. That is a HUGE tax bill.
And as other articles point out … this impacts the poor the most. Yes wealthy parents may get a $37% federal income tax bill … yes, keep hoping you don’t get audited by the IRS … but for low income families that might be subject to income limitations on their benefits, food stamps, ACA healthcare … this extra “income” may cost you more than you actually receive.
SC Legislators are aware of this problem … we have told them … but the “paid” special interest sing a different story. Well, what do they have to say now? Guess who has been WRONG almost every time … the “paid” special interest advocates. #FollowTheMoney!!!
Remember Palmetto Promise Institutes “Bigger. Better. Faster.” proclamation … read it HERE. These guys have no idea what they are talking about.
“This is a worst-case scenario for students, their families, the school districts and the state.” – TN STATE SENATOR RAUMESH AKBARI
