Oklahoma Parental Choice Tax Credit Act: What Private School Families Need To Know

IMPORTANT UPDATE! On November 30th, 2023, the Oklahoma Tax Commission announced that the application start date for the Oklahoma Parental Choice Tax Credit has been delayed until Wednesday, December 6th, 2023 at 2 p.m. The 60-day priority window will close on Monday, February 5th, 2024.

Things to be aware of:

1. Taxpayers can apply for the credit using the application starting December 6th at 2:00 p.m. CST. Those whose federal AGI is below $150,000 must apply between 12/1 - 2/1 of each year to receive priority consideration. For 2024, the priority window is 12/6/23 - 2/5/24/ The application will remain open until December 31st, 2024, or until the annual cap has been met, whichever occurs first. This means that the participating school has to have estimated fees and tuition for the NEXT school year set by November.
2. This checklist has what you'll need to have when you apply. While the school won't need the student's SSN, the taxpayer applying for the credit will. 
3. If you are a non-parent/guardian claiming the credit, you will need the Parental Consent Form for each student. This document is coming soon on the Resources page for the program.
4. The credit is set by TAX year, not the school year. This means that parents have to know by November what school their students will attend in August (9 months in advance) and have proof of intended enrollment if they are eligible for priority consideration.
5. Families do NOT have to apply LNH and other scholarships before the tax credit. LNH Scholarship amounts aren't released until mid-July by the OSDE (as they're dependent on the state aid allocation that is determined each legislative session). Other scholarships that are available to students depend on funds raised throughout the year, so the schools won't have that total when the portal opens.
6. The language has been updated so that State School Board-accredited or schools accredited by another accrediting body are eligible to participate.  
7. The private school tax credits can only be claimed through the submission of an online application during the set window with the OTC. The credit cannot be claimed on the Oklahoma tax return.

OPSA has put together this Frequently Asked Questions blog to help private school parents, teachers, and school administrators learn more about how the Oklahoma Parental Choice Tax Credit of the ASPIRE Oklahoma Plan applies to them. We have tried to cover everything currently known about the tax credit, however, as the Oklahoma Tax Commission makes decisions about the tax credit's implementation more information will be added to this blog. We suggest you bookmark this blog and check back frequently for the most up-to-date information. In the meantime, you can email any questions to our Director of Parent Services, Lucia Frohling, at LFrohling@okpsaedu.org

Want to learn more about the Oklahoma Parental Choice Tax Credit of the ASPIRE Oklahoma Plan for homeschool parents? Check out this blog post.

Want to learn more about the historic public school investment portion of the ASPIRE Oklahoma Plan? Check out this blog post.

Q: What is a refundable tax credit?

A: Refundable tax credits are called "refundable" because if you qualify for a refundable credit and the amount of the tax credit is larger than the tax you owe, you will receive a refund for the difference. For example, if you owe $3,000 in taxes and qualify for a $5,000 refundable tax credit, you would receive a $2,000 refund. 

Q: When will the Oklahoma Parental Choice Tax Credit Act take effect?

A: January 1, 2024 

Q: Who will manage the Oklahoma Parental Choice Tax Credit? 

A: The Oklahoma Tax Commission in partnership with Merit.

Q: Can I claim the Oklahoma Parental Choice Tax Credit for the entire 2023-2024 school year? 

A: No. You can use it for the spring semester of 2024. The Oklahoma Parental Choice Tax Credit Act begins with tax year 2024, so the 2023 Fall semester is not eligible to be claimed. Starting in the Fall semester of 2024, the entire school year will be eligible.

Q: Do I have to utilize the Oklahoma Parental Choice Tax Credit if my child is enrolled at an accredited private school? 

A: No. Claiming the tax credit is 100% at the discretion of each eligible taxpayer.  

Q: What educational expenses qualify for this tax credit?

A: “Qualified expenses” for the purpose of claiming the credit for private school families are tuition and fees for the accredited private school at which your child is enrolled.

Q: What private school does my child have to attend to use the Oklahoma Parental Choice Tax Credit? 

A: The student must attend an accredited private school in order for the tuition and fees to be eligible for the Oklahoma Parental Choice Tax Credit. This means that the school is accredited by either the Oklahoma State Board of Education or another accrediting association.

Q: What are the steps to claim the Oklahoma Parental Choice Tax Credit for accredited private school tuition and fees?

A: Taxpayers must complete and submit ONE application online through the Oklahoma Tax Commission (OTC) for all of the students in their household attending an accredited private school each tax year starting December 6th, 2023 at 8:30 a.m. CST and by no later than February 5th, 2024 for families whose AGI is below $150,000 to receive priority consideration. The application will remain open until December 31, 2024, or until the annual cap is reached, whichever occurs first.

After all timely-filed applications entitled to priority consideration have been processed, the OTC will review and process the remaining applications for the credit in the order received, provided the annual cap has not been reached.

Private school tax credits are exclusively claimed through the submission of an application. The credit CANNOT be claimed on the Oklahoma income tax return.

Along with the application, a verification of enrollment completed by the accredited private school in which the student is enrolled or is expected to enroll with the information below must be uploaded.

1. Name, address, and date of birth of the eligible student;
2. Designated semester(s) and tax year(s) during which the qualified expenses are paid;
3. Name and address of the school;
4. Name and telephone number of a contact person at the private school;
5. The amount of qualified tuition and fees to be charged to the taxpayer for the eligible student during the tax year

You will get one installment for each school semester. Each installment payment will be half of the expected amount of the full year of private school tuition and fees or half of the max credit amount, whichever is less.

In reviewing applications for eligibility, the OTC will give preference to those who claim credits and have a household income of less than $150,000.

Q: What is the deadline to apply to receive payment installments through the Oklahoma Parental Choice Tax Credit?

A:  For tax year 2024, the application period for students with household income of less than $150,000, will be December 6, 2023, through February 5, 2024.  For tax year 2025 and subsequent tax years, the application period for students with household income of less than $150,000, will be December 1^st (preceding the applicable tax year) through February 1st.  Applications will be processed on a first-come, first-serve basis. This application will be available on the Oklahoma Tax Commission's website.

Q: How will I receive the installment payments?

A:  Payment of the credit will be sent by the OTC as an individual warrant (check) made payable to the taxpayer and mailed to the private school where the eligible student is enrolled or expected to enroll. The taxpayer will endorse the check to the private school for deposit into the account of the school, unless the tuition and fees for the eligible student have already been paid by the taxpayer.

Q: How much money is my child eligible for through the Oklahoma Parental Choice Tax Credit Act?

A: The Oklahoma Parental Choice Tax Credit Act provides refundable tax credits of a minimum of $5,000 up to a maximum of $7,500 per child to cover the cost of private school tuition and fees. 

The tax credits are tiered based on the household income for the second year preceding (meaning the 2022 tax year Adjusted Gross Income for the 2024 tax year credit).

Q: Is there a cap on the Oklahoma Parental Choice Tax Credit?

A: Yes. For tax year 2024, the tax credit program (as a whole) is capped at $150 million. For tax year 2025, the cap is increased to $200 million. For tax year 2026 and subsequent years, the cap will be $250 million. 

Q: What if you need access to the Oklahoma Parental Choice Tax Credit funds to pay for tuition and fees?

A: If you are a household with less than $150,000 in income (tax year 2022 AGI), you should apply with the Oklahoma Tax Commission to receive up-front installments as soon as the application opens on December 5th, 2023 at 8:30 a.m. CST. Priority will be given to households with less than $150,000 in income who apply by no later than February 5th, 2024. If you are a household with more than $150,000 in income, you MUST still apply for up-front payments as well. The tax credit will only be accepted through the application process.

Q: What else should I know about accepting the Oklahoma Parental Choice Tax Credit?

A: Participation in the Oklahoma Parental Choice Tax Credit Program shall have the same effect as a parental revocation of consent, which means that the child’s public school district is no longer required to provide special education services. The Oklahoma State Department of Education (OSDE) will be responsible for providing parents, legal guardians, custodians, or other persons with the legal authority of eligible students with disabilities notice of this. Note: This same language is in the Lindsey Nicole Henry (LNH) Scholarship statute and has since been found to be in violation of Federal Child Find regulations. It is expected that the language in both statutes will be appealed.

Q: What happens if our household income allows us a $5,000 per child tax credit, but my child’s tuition is $7,000?

A: If the tuition of the school you have chosen for your child is more than the amount you qualify for, your student may be eligible for the Lindsey Nicole Henry Scholarship, Oklahoma Equal Opportunity Scholarship Program (such as OSF or TCS), or other financial aid through your chosen school. You should speak with administrators at your chosen school and let them know you are in need of financial aid and ask what options are available. 

Q: How will the Oklahoma Parental Choice Tax Credit work if my child is a recipient of the Lindsey Nicole Henry Scholarship (LNH)?

A: The Oklahoma Parental Choice Tax Credit states that the Lindsey Nicole Henry Scholarship may be used in conjunction with the tax credit. You may apply for any scholarships that you feel your child may be eligible for. These include the Lindsey Nicole Henry Scholarship, Oklahoma Equal Opportunity Scholarship Program (such as OSF or TCS), or other financial aid through your chosen accredited private school.

Q: How will the Oklahoma Parental Choice Tax Credit work if my child is a recipient of the Oklahoma Equal Opportunity Scholarship Program?

A: You should be able to use both. The Oklahoma Parental Choice Tax Credit has nothing that states NOT being able to utilize the Oklahoma Equal Opportunity Scholarship Program (such as OSF or TCS), or other financial aid through your chosen school. Since each individual school (or scholarship granting organization) that participates in the Oklahoma Equal Opportunity Scholarship Program manages its own program, there is nothing to preclude the use of both. 

Q: What do the participating private schools have to do?

A:  Along with providing the taxpayers with the affidavit to apply for the tax credit, there are other requirements. On or before November 1st of each year, participating private schools must respond electronically to the OTC's request for information which includes the following for each eligible student for whom the school received a credit payment for the current tax year:

1. Name and address of the private school;
2. The amount of credit received by the private school on behalf of the eligible student;
3. Dates of attendance of the eligible student;
4. The name, address, and date of birth of eligible student.

The private schools will also have to complete a participation agreement with the OTC. Their agreement must include the following

1. Name, address, phone number, FEIN, and website of the private school;
2. Contact information for the private school; 
3. Proof of accreditation from the State Board of Education or another accrediting association; 
4. Other school identification information.
   
   

Q: Who is responsible for sharing ratings, reviews, and information about education service providers? 

A: The Oklahoma State Department of Education (OSDE) has been directed to create a user-friendly website for users to publicly rate, review, and share information about education service providers. OPSA will update the answer to this question when more information is available. 

Q: Can I use the Oklahoma Parental Choice Tax Credit to move my child to a different public school?

A: The tax credit is for schools that charge tuition. If you would like to move your child to a different public school district please see OPSA’s blog on open transfer. You can apply for open transfer starting June 1st, 2023. If you would like to move your child to a charter school, you can find more information here.

Q: What if I move my child from one accredited private school to another accredited private school?

A: You are still eligible for the tax credit.

Q: What if I move my child from an accredited private school to a public traditional, charter, virtual, or magnet, or non-accredited private school?

A: You are eligible for an adjusted tax credit amount for the length of time you were enrolled in the accredited private school (under the same parameters as if the student was there the entire year), starting in tax year 2024. 

Q: What if I move my child from an accredited private school to homeschool them?

A: You are eligible for an adjusted tax credit amount for the length of time you were enrolled in the accredited private school (under the same parameters as if the student was there the entire year), starting in tax year 2024. 

Q: Can I use the Oklahoma Parental Choice Tax Credit if my child is enrolled in a charter school or magnet school?

A: The tax credit is for schools that charge tuition. Households are not eligible to claim the credit for an eligible student who enrolls as a full-time student in a public school district, public charter school, public virtual charter school, or magnet school.

Q: Will the Oklahoma Parental Choice Tax Credit end or go away?

A: In the event of a failure of the State of Oklahoma’s revenue, pursuant to the Oklahoma State Finance Act, the Oklahoma Parental Choice Tax Credit shall be reduced proportionately to the reduction in the amount of money appropriated to the State Board of Education for the financial support of public schools for the fiscal year in which the failure of revenue occurs.

Q: Can I be audited by the Oklahoma Tax Commission if I claim the Oklahoma Parental Choice Tax Credit?

A: Yes. As is recommended for all receipts, it is best to keep copies of receipts and returns for at least seven (7) years. The OTC shall have the authority to conduct an audit or contract for the auditing of receipts for qualified expenses.

Q: Will I have to return credits if I claim expenses that don’t meet the requirements of the Oklahoma Parental Choice Tax Credit?

A: Yes. The OTC shall be authorized to recapture the funds on a prorated basis if an audit conducted shows that the credit was claimed for expenditures that were not qualified expenses or it finds that the taxpayer has claimed an eligible student who no longer attends a private school or has enrolled in a public school for the period for which the credit was claimed; or the taxpayer failed to comply with any other provisions of the tax code.

Q: Will the amount of the tax credit be reduced if I owe state taxes?

A: Yes. The OTC will deduct from the amount of credit due the amount of any delinquent state tax, penalty, or interest that the taxpayer owes.

Q: Can another family member (grandparents, aunt, uncle, etc.) claim the Oklahoma Parental Choice Tax Credit if they’re the ones who pay for my child’s accredited private school tuition and fees?

A: Yes. The Act states that the credit is available for any Oklahoma taxpayer who incurs a qualified expense on behalf of an eligible student. Two taxpayers cannot claim the same credit on the same eligible student. A taxpayer in this instance is defined as a biological or adoptive parent, grandparent, aunt, uncle, legal guardian, custodian, or other person with legal authority to act on behalf of an eligible student.

Disclaimer: The information provided in this material does not, and is not intended to, constitute legal or tax advice. All information, content, and materials are for general informational purposes only.  

Readers of this material should contact their attorney or tax professional to obtain advice with respect to any particular legal or tax-related matter.  The information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.  

The views expressed are those of the individual authors writing in their individual capacities only – not those of their respective employers, any state agency, or committee/task force as a whole.  All liability with respect to actions taken or not taken based on the contents of this material are hereby expressly disclaimed.  The content on this material is provided "as is;" no representations are made that the content is error-free.