This article is intended for Iowa parents/guardians applying for the 2025–26 Students First ESA Program who have questions about how ESA funds are treated for tax purposes.
For Iowa tax purposes, ESA funds are not taxable income if the funds are used for eligible educational expenses (e.g., tuition and fees, tutoring). See Eligible and Ineligible Expenses.
For federal tax purposes, ESA funds are treated differently. ESA funds used for tuition and fees are not taxable. However, ESA funds used for other purposes are considered taxable.