Idaho Launches Parental Choice Tax Credit — What Parents and Taxpayers Need to Know.

Idaho passed the new Parental Choice Tax Credit into law. This new law will enable Idaho parents to claim a refundable state income tax credit of up to $5,000 per child for qualified K–12 educational expenses incurred outside the public school system.

Who Qualifies

To claim the credit the students must be full-time Idaho residents between the ages of 5 and 18 (or up to 21 with disabilities). The Parents must claim the child as a dependent on their Idaho income tax return to claim the credit.

Income Prioritization

Families with income below 300% of the federal poverty level will be prioritized before the program opens up to the remaining public. Click here to view a table of the 2025 poverty levels. Based on the 2025 poverty guidelines a family of 4 would qualify for the credit if their income fell below $96,450.

The program has an annual budget of $50 million, and funds will be awarded on a first-come, first-serve basis.

Qualified Expenses

To claim the credit Idaho parents must incur qualified education expenses at nonpublic schools. The law defines what is consider a qualified school.

Nonpublic School, means a private school, microschool, or learning pod that provides academic instruction to eligible students, which academic instruction may be provided in person, online, virtually, or through any combination thereof, and such academic instruction is provided by an accredited school or documented in a portfolio of evidence[...]

If students attend a qualified nonpublic school, the following expenses are considered eligible for the Idaho Parental Choice Tax Credit:

• Tuition

• Textbooks

• Curriculum used for K–12 instruction

• Transportation to and from school

  
  

Additionally, parents may be reimbursed for using their personal vehicle to transport their child to school. Reimbursement is based on the Idaho State employee mileage rate, which in 2025 is currently 70.0 cents per mile.

Application Process

Applications will open each January 15 and will remain open for 60 days. The program is retroactive, so make sure to save your receipts for any qualified education expenses you incur during 2025. If funds remain after the initial 60 day application window the program will reopen on August 15 or until the $50 million annual cap is reached.

Additional Requirements

• Parents must submit a satisfaction and engagement survey annually to remain eligible.

• Only one parent can claim the credit per child.

• Public school enrollees (even part-time) are not eligible for the same period.

• Advance payments must be used only on qualifying expenses and may be recaptured if eligibility changes.

Is the tax credit taxable?

The refundable tax credit or advance payment provided by the Parental Choice Tax Credit, is not considered taxable income in Idaho.

Other considerations:

Federal Tax

Under federal tax guidelines, any portion of a state tax credit that exceeds an individual’s state tax liability is generally treated as taxable income under IRC Section 61, unless a specific exclusion applies. Additionally, if a taxpayer itemizes deductions, the credit may also reduce the amount of state taxes they can deduct on their federal return, since it effectively lowers the amount of state taxes paid.

Divorced couples

For divorced parents, the credit will go to whichever parent claims the child as a dependent for that tax year. This could lead to some confusion, since the school year spans multiple tax years, and tracking expenses may be more complicated for families who alternate claiming the child each year.

Other qualified expenses

The law does not clearly state whether qualified expenses include items such as computers or other equipment required for online learning.

Final Thoughts

Although the law is now in effect retroactively from January 1, 2025, the Idaho State Tax Commission has not yet released official forms or procedures for claiming the credit.

If you have children in private education or are considering alternative education options, now is a good time to start tracking your expenses and review your household income to see if you may qualify for Idaho's Parental Choice Tax Credit.

Disclaimer: This post is for informational purposes only and should not be considered tax, legal, or financial advice. Every individual's financial situation is unique, and tax laws are complex and frequently change. Please consult a qualified tax advisor or attorney for guidance tailored to your specific circumstances.