The Treasury Department and the IRS announced new regulations that will launch a nationwide school‑choice tax credit on Jan. 1, 2027.
The Federal Scholarship Tax Credit (FSTC) lets taxpayers claim up to $1,700 per individual and $3,400 for married couples filing jointly for contributions to Scholarship Grantting Organizations that fund K‑12 scholarships.
How the Credit Works
Taxpayers may donate to any IRS‑listed SGO in a participating state and receive a nonrefundable federal credit equal to the lesser of the donation amount or the statutory limit.
States may add their own credit, allowing a donor in a state with a 100 % credit up to $2,000 to claim $1,700 federally and $2,000 at the state level for a combined benefit of $3,700.
Potential Scale
The IRS projects that 600 to 700 SGOs will operate by decade’s end, funding up to 2.2 million scholarships annually and drawing contributions from more than 11 million taxpayers who together could contribute nearly $26 billion each year.
Equity Concerns
A Brookings Institution analysis found that counties in the top 10 % of median income could generate $3,859 per pupil in potential funding, while the bottom 10 % could generate only $2,233 per pupil.
The study warned that without targeted allocations, the program could become regressive, benefiting wealthier districts more than low‑income communities.
Supporters’ View
The American Federation for Children estimates that universal participation could benefit up to 51 million children.
Treasury Secretary Scott Bessent called the credit a historic step for educational freedom, noting that 30 states have already joined and urging all 50 to follow.
The regulations set Jan. 1, 2027 as the launch date and give states authority to approve SGOs while prohibiting undue restrictions on school choice.
