Missouri establishes new tax credit regulations for qualified education expenses

On April 8, 2025, the Missouri State Legislature introduced House Bill 77, a significant piece of legislation aimed at reforming the state's education funding landscape through a new tax credit program. The bill seeks to provide financial relief to families by allowing qualified taxpayers to claim tax credits for eligible education expenses incurred for their children, thereby addressing the rising costs of education in Missouri.

The primary provisions of House Bill 77 include the establishment of a refundable tax credit for qualified taxpayers who incur eligible education expenses for a qualified student. To qualify, taxpayers must submit an itemized list of these expenses along with proof of the student's dependency status. Notably, the bill stipulates that the tax credit cannot be claimed for students enrolled full-time in public schools, aiming to direct financial support towards alternative educational pathways.

A key aspect of the bill is its emphasis on privacy, as it mandates that personally identifiable information of applicants and their families must be protected. Additionally, the legislation prohibits taxpayers from claiming the credit if they are also participants in the Missouri empowerment scholarship accounts program for the same student, ensuring that the benefits are not duplicated.

The introduction of House Bill 77 has sparked considerable debate among lawmakers and education advocates. Proponents argue that the bill will provide much-needed financial assistance to families seeking educational alternatives, particularly in light of increasing tuition and associated costs. Critics, however, express concerns that the bill may divert funds from public education and exacerbate inequalities in the education system, as it primarily benefits those who can afford to pay upfront education costs.

Economically, the bill could have significant implications for Missouri's budget, as it introduces a new tax credit that may reduce state revenue. The refundable nature of the credit means that taxpayers could receive refunds even if they do not owe taxes, potentially increasing the financial burden on the state. Furthermore, the requirement for audits of claimed expenses could lead to increased administrative costs for the Department of Revenue.

As House Bill 77 moves through the legislative process, its future remains uncertain. Experts suggest that the outcome will depend on the ability of lawmakers to balance the interests of families seeking educational support with the need to maintain robust funding for public education. The ongoing discussions surrounding the bill highlight the broader challenges facing Missouri's education system and the ongoing debate over how best to support students and families in an evolving educational landscape.