The Treasury Department laid the groundwork on Thursday for the nation’s first federal school choice program, allowing married couples to receive tax credits of up to $3,400 for donations that fund K-12 scholarships.
The proposed regulations would implement the Education Freedom Tax Credit beginning Jan. 1. Individual taxpayers could receive a dollar-for-dollar, nonrefundable federal income tax credit of up to $1,700 for cash donations to eligible scholarship-granting organizations. Married couples filing jointly could receive twice that amount.
The organizations would use the donations to provide scholarships covering private-school tuition, tutoring, services for children with special needs, books, computers, and other educational expenses. Taxpayers could donate to an eligible organization in any participating state, regardless of where they live.
States must opt into the program and identify eligible scholarship organizations. Treasury Secretary Scott Bessent said 30 states had already agreed to participate and urged the rest to join.
“The Education Freedom Tax Credit marks a new chapter in educational freedom and opportunity by establishing America’s first nationwide school choice program and empowering states to give students and families more options,” Bessent said.
School choice has been a priority for conservatives for decades, with supporters arguing that families should be able to direct education funding toward schools and services that best serve their children. The movement gained ground in Republican-led states through vouchers, tax credits, and education savings accounts before President Donald Trump signed the federal tax credit into law in 2025.
Treasury and the IRS estimated that 96% of children in participating states could qualify for scholarships under the proposed income rules and the eligibility shortcuts for families receiving certain needs-based assistance.
By 2030, the administration projected that more than 11 million taxpayers could contribute nearly $26 billion annually to between 600 and 700 scholarship organizations. Those donations could fund as many as 2.2 million scholarships each year.
The proposal would prevent participating states from imposing stricter requirements on scholarship organizations than those established under federal law, including restrictions based on the schools students attend or the education expenses scholarships cover. Taxpayers could also carry unused credits forward for up to five years.
Sydney Altfield, CEO of Teach Coalition and founder of Scholarships for All, urged New York Gov. Kathy Hochul (D) to enroll her state in the program.
“We’re also thrilled that couples filing jointly can receive a combined federal tax credit of up to $3,400,” Altfield told the Washington Examiner, adding that the provision would expand the resources available to students.
Other groups that applauded the move on Thursday, such as senior adviser of legal policy at EdChoice, Leslie Hiner, accused 20 states and Washington, D.C., of “gatekeeping” over their continued resistance to opting in with the other 30.
THE BEST ACCOUNTABILITY TOOL IN EDUCATION IS GIVING PARENTS A CHOICE
“The Treasury Department not only solicited concerns and desires from the public but actually considered them prior to enacting these regulations,” Hiner said. “Their dedication to constructing rules that will maximize the workability of the tax credit to the benefit of students and families is appreciated.”
Treasury and the IRS also issued temporary regulations establishing registration, reporting, auditing, and donor-verification procedures ahead of the program’s launch.
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[ H/T Washington Examiner ]
