The federal government is poised to launch the first national scholarship tax-credit program under the One Big Beautiful Bill Act, a sweeping tax and spending law signed in July 2025. This provision would create a nonrefundable federal income tax credit of up to $1,700 for individual taxpayers who donate to certified scholarship-granting organizations (SGOs). Organizations receiving these contributions are expected to provide scholarships for educational expenses, including tuition, tutoring, books, and supplies.
The program, scheduled to take effect for the 2027 tax year, marks a significant expansion of federal tax incentives for education and plays into a broader national conversation about school choice and education funding. Unlike most existing federal education benefits, this credit is offered on a dollar-for-dollar basis for contributions, meaning donors can reduce their federal tax liability by the full amount they give.
Participation is not automatic. Each state must opt in to the program by submitting a list of eligible SGOs to the U.S. Treasury Department. Only students residing in participating states will be eligible for scholarships funded through these contributions. Critics argue the requirement could lead to uneven access across states, depending on political attitudes toward private school choice and tax incentives.
Scholarship advocates and some policymakers see the tax credit as a potential source of billions in new education funding. Estimates suggest the program could generate $25.9 billion in credits over the next decade if fully utilized, with scholarship dollars flowing to families for a wide range of K-12 expenses.
However, the program’s design and implementation remain contentious. Supporters argue that it increases educational options for families, particularly in states with limited public school choice, and that it incentivizes private contributions to supplement public education funding. Opponents voice concerns that the structure could divert resources away from traditional public schools and exacerbate disparities in educational opportunities.
Key facts about the federal tax credit scholarship
- Dollar-for-dollar tax credit: Taxpayers can reduce their federal tax liability up to $1,700 for eligible contributions to scholarship-granting organizations.
- State opt-in required: Only students in participating states will be eligible for scholarships funded by the program.
- Scholarship eligibility: Funds are expected to support educational expenses for students whose families meet income criteria and attend certified schools.
- Program start date: The credit applies beginning with the 2027 tax year.
Analysts say the scholarship tax credit could reshape how families finance education, especially if state leaders embrace the program. States with governors or legislatures supportive of school choice may opt in quickly, while others could delay or reject participation, creating a patchwork of access.
In states that opt in, individual donors and corporations may play a larger role in funding education through contributions to SGOs. How those contributions will interact with existing state tax credits and public school budgets remains an open question, as rulemaking by federal agencies and state decisions take shape.
As implementation approaches, policymakers and education stakeholders are expected to monitor uptake, impacts on public funding, and whether the program expands educational options without unintended financial consequences for traditional public schools.
