Federal School Choice Tax Credit Is Waiting — As Long As States Opt In

Parents who send their kids to private school can claim a federal school choice tax credit on next year’s income tax returns — as long as state officials go along with it.

States must soon decide whether to participate in the first major federal program funding private schools. Last July, Congress included a tax-credit scholarship in last year’s budget reconciliation package.

Previously, all major private school choice programs were state-level. The new federal tax-credit scholarship forces all states and the District of Columbia to take a stand on private school choice, regardless of whether they currently have their own voucher program.

Taxpayers in states that opt in receive a dollar-for-dollar federal tax credit on up to $1,700 for donations to nonprofit Scholarship Granting Organizations, or SGOs, which in turn provide scholarships for private school tuition and other expenses. The credit takes effect on 2026 tax-year returns filed in early 2027.

Twenty-eight states have opted in so far, and four have declined to participate, according to an Education Week analysis. Eighteen governors and the mayor of the District of Columbia haven’t announced their decisions.

The states that have opted in so far are predominantly Republican-led, and only one with a GOP governor remains undecided, according to the analysis. Democratic-led Colorado and Montana have opted in, and Virginia agreed to participate under former Democratic Gov. Glenn Youngkin. All four states that opted out — Hawaii, New Mexico, Oregon and Wisconsin — are led by Democrats.

Democrats have historically opposed school voucher programs for siphoning tax money away from public schools to support private, often religious schools that lack public accountability. Governors and lawmakers in blue states who have been able to avoid taking stands on school vouchers must now show their hands.

“What makes the program tricky is that it blurs the party lines on school choice. It’s not a traditional voucher,” Michelle Dimino, director of education at Third Way, a centrist Democratic think tank, told The Washington Post.

As long as their states are participating, those whose family income doesn’t exceed 300 percent of their area’s median gross income qualify for scholarship funds. The government hasn’t yet said how much money would be awarded.

Scholarships can cover “a broad set of expenses incurred in connection with or required by any K-12 public, private, or charter school,” the Education Department said in a fact sheet on the program. Those uses could include private school tuition, tutors, school uniforms, technology, after-school programs, transportation, or services for students with disabilities.

Dimino is urging all states to participate but said that “opposition to any school choice policy is deeply ingrained for many Democrats.”

Proponents of voucher programs argue that they enhance educational freedom, allowing parents to choose schools that best fit their children’s needs and result in better educational outcomes, providing an alternative to underperforming districts.

Thirty states and the District of Columbia have at least one private school choice program, according to an Education Week analysis. Of those, 18 states have at least one private school choice program that’s universally accessible to K-12 students in the state or on track to be universally accessible.

Lawmakers in 30 states and the District of Columbia have approved private school-choice programs, often called voucher bills. Of them, 18 offer at least one program that is either currently or scheduled to become universally available to all K-12 students.

What do you think of state voucher programs that divert tax money from public to private schools? Any thoughts about a new federal tax credit to help offset tuition and other costs of private school? Join the conversation in the comments below.