Frequently Asked Questions
What is a Tax Credit?
A tax credit is a discount on your annual tax bill. For example, if someone owes $10,000 in taxes in 2024 and they receive a $1,000 tax credit, then their actual 2024 tax bill will be $9,000.
How is it different from a tax deduction?
Both credits and deductions can reduce your tax bill, but tax credits are simpler and more direct.
A tax credit directly reduces your tax bill by the credit amount.
A tax deduction reduces your taxable income. For example, if someone with annual income of $100,000 receives a tax deduction for $10,000, their taxes are calculated as they made $90,000.
How is it different from a tax deduction?
Both credits and deductions can reduce your tax bill, but tax credits are simpler and more direct.
A tax credit directly reduces your tax bill by the credit amount.
A tax deduction reduces your taxable income. For example, if someone with annual income of $100,000 receives a tax deduction for $10,000, their taxes are calculated as they made $90,000.
What would a tax credit scholarship in New Jersey look like?
Scholarships would be limited to low and middle-income students (i.e. family income <$200,000, adjusted based on family size). A single Scholarship Granting Organization would accept all tax creditable donations and distribute all scholarships – spending no more than 5% on administrative costs.
Why is this good policy?
Nonpublic schools contribute billions of dollars to the state economy, provide a valuable education to over 10% of the state’s children, and save local public school systems over $2.5 billion per year. Offering tax credits to invest in these students and schools is as sensible as offering tax credits to attract jobs and businesses to the state.
Realistically, how big will these scholarships be?
This depends on how many apply – the range can vary, but we will be starting from a place that will already make a big dent in tuition.
How will this help families?
Low and middle-income families would be provided thousands of dollars in tuition relief.
How will we coordinate $250m in tax credit donations every year?
Big corporations have no trouble raising funds in states with even larger programs.