Big changes are coming to education funding. In July 2025, the federal government passed the One Big Beautiful Bill Act—a sweeping tax and spending law that introduced the first-ever national scholarship tax-credit program. This program would let individual taxpayers claim a nonrefundable federal income tax credit of up to $1,700 when they donate to certified scholarship-granting organizations (SGOs). These organizations are expected to use donations to provide scholarships for educational costs such as tuition, tutoring, books, and supplies.
The program starts with the 2027 tax year and marks a big shift in how the federal government supports education. It is part of the larger conversation about school choice and funding. Here is what makes it different: Instead of a complicated formula, the credit gives you back exactly what you donate, dollar for dollar, so you can lower your federal tax bill by the same amount.
States must choose to join the program by sending a list of eligible SGOs to the U.S. Treasury Department. Only students living in participating states can receive scholarships funded by these donations. Some critics say this rule could create unequal access, depending on how each state views private school choice and tax incentives.
Supporters of the scholarship and some policymakers believe the tax credit could bring billions of dollars in new education funding. If used to its full potential, the program could provide $25.9 billion in credits over the next ten years, helping families pay for many K-12 expenses.
Still, there is debate about how the program is set up and how it will work. Supporters say it gives families more education choices, especially in states with fewer public school options, and encourages private donations to help fund education. Critics, including Maura McInerney, legal director at the Education Law Center, say the tax break mainly benefits wealthy donors and could divert resources from public schools and low-income families. They worry this could widen gaps in educational opportunities, according to a report from Public News Service.
What You Should Know About the Federal Scholarship Tax Credit
- You can get a dollar-for-dollar tax credit—up to $1,700—when you donate to a certified scholarship-granting organization.
- Only students in states that choose to join the program can get these scholarships, so where you live matters.
- Scholarships are intended to help cover the cost of school for students whose families meet certain income guidelines and attend certified schools.
- The program starts with the 2027 tax year, so you’ll be able to claim the credit on your taxes after that.
Experts say this new tax credit could really change how families pay for education, especially if state leaders get on board. States that support school choice might join right away, but others could decide to wait—or not join at all. That means access to these scholarships could depend on where you live.
In states that join the program, both individual donors and companies could have a bigger role in funding education by giving to SGOs. It is still unclear how these donations will work with current state tax credits and public school budgets, as federal and state rules are still being developed.
As the program approaches launch, policymakers and education leaders will monitor how many people use it, how it affects public funding, and whether it increases educational choices without causing problems for traditional public schools.