Alabama offers a refundable tax credit program to parents who transfer their children enrolled in or assigned to a priority public school to a qualifying public or private school. Different from traditional tax credit programs, refundable tax credits have greater value for parents of more modest incomes. Learn more about the program on this page, including eligibility, funding, regulations, legal history, and more.
We do not administer this program.
Parents receive a tax credit worth the lesser of (1) 80 percent of the average annual state cost of attendance for a K–12 public school student during the applicable tax year, or (2) their children’s actual cost of attending school. If the taxes owed by the parents are less than the total credit allowed, they may receive a rebate equal to the balance of the unused credit.
(Last updated December 14, 2023)
Parents who transfer their children from priority public schools to qualifying public or accredited private schools are eligible. Parents with children who are starting school for the first time in Alabama and zoned to attend priority public schools are also eligible. Alabama defines a public school as priority if it meets one or more of the following requirements: 1) The school is designated as a priority school by the state Superintendent of Education, or 2) the school does not exclusively serve a special population of students and has received a D or an F on the most recent state report card.
(Last updated December 14, 2023)
The most glaring weakness of Alabama’s individual tax-credit program is its eligibility restrictions. Instead of basing participation on whether an entire school is “priority,” as measured by an arbitrary, dynamic state metric, participation should be permitted whenever a parent determines a child’s educational needs are not being met at the current school. Only about one in 20 students in the state can take advantage of the credit because of these restrictions.
Alabama also should consider amending this program to allow more money to follow participating students. The amount of money parents receive through Alabama’s credit is less than the average funding parents receive through private school choice programs in other states. The credit is worth up to 80 percent of what the state spends per student. Despite these funding shortfalls, eligible Alabama students may take advantage of both the Education Scholarship Program and this program, increasing their scholarship value. However, few families are taking advantage of that opportunity. The sending public school keeps the remaining 20 percent of state funding in addition to any local or federal money associated with the cost of educating the transferring student. An effective next step would be to enable banks to give tax anticipation loans to parents who cannot front the money to pay for tuition, allowing more students to access schools of choice. An even greater step for Alabama is to allow all the state money to follow the child to his or her school of choice.
(Last updated December 14, 2023)
• Income Limit: None
• Prior Year Public School Requirement: Yes (Families must show a cost of transfer from a priority public school to a qualifying public school or a private school. Families may continue to receive the tax credit or rebate until the student reaches the highest grade level of the priority public school they are zoned to attend.)
• Geographic Limit: Statewide
• Enrollment Cap: None
• Credit Value: 100%
• Individual Credit / Rebate Cap: lesser of tuition or 80% state average
• Testing Mandates: State test or Nationally norm-referenced tests
• Limited to students in low-performing schools
Parent Requirements
• Provide certification that:
o The student was enrolled in or assigned to a “priority” school;
o the student was transferred to a “qualifying” public or private school; and
o proof of the cost of attendance at the “qualifying” public or private school.
(Last updated December 14, 2023)
(Last updated December 14, 2023)
On April 8, 2014, a U.S. District Court judge dismissed a claim brought by the Southern Poverty Law Center challenging the Alabama Accountability Act on grounds the school choice program violated equal protection C.M., et al., v. Robert J. Bentley, M.D. et al., 13 F.Supp.3d 1188 (N.D. Ala. 2014).
On March 2, 2015, the Alabama Supreme Court ruled, in an 8-1 decision, that the Alabama Accountability Act enacted in 2013, which includes Alabama’s refundable tax credit and tax-credit scholarship program, is constitutional. The high court overturned a May 2014 lower court ruling by the Montgomery County Circuit court which initially struck down the Alabama Accountability Act. Magee v. Boyd, 175 So.3d 79 (Ala. 2015).
(Last updated December 6, 2023)