Treasury releases guidelines for federal school choice tax credit, urging states to opt in 

The U.S. Treasury Department released long-awaited guidelines for the federal school choice tax credit Thursday, drawing praise from education freedom advocates and renewed calls for undecided states to opt in.

“Under President Trump, this Administration continues to transform America’s education system to meet the needs of each student,” said U.S. Secretary of the Treasury Scott Bessent. “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.

“Thirty states have already opted in, and we encourage all 50 states to participate so every American student and family can benefit.”

In the same press release, Secretary of Education Linda McMahon called school choice the “key to unlocking opportunity and success.” She said the Education Freedom Tax Credit (EFTC) would “supercharge these opportunities for millions of children.”

The credit, which takes effect in January, will allow individual taxpayers to receive a tax credit of up to $1,700 for donations to a qualified scholarship granting organization (SGO). Donations will be bundled into school choice scholarships that can be used for private school tuition, tutoring, special needs services, curriculum and school supplies. Both public and private school students are eligible, but only in participating states.

Families must earn no more than 300% of the area median income, which varies widely by region. One study found that more than 90% of U.S. K-12 students would qualify.

The Treasury also announced that married couples filing jointly – representing one-third of federal tax returns – will be allowed to claim up to $3,400 in tax credits, expanding the program’s potential reach.

The Trump administration estimates the credit could support as many as 700 SGOs by 2030, generating as much as $26 billion in donations to fund millions of scholarships annually.

Praise from advocates

Longtime school choice advocates praised the guidelines and urged the remaining states to participate.

“We applaud the White House, U.S. Department of the Treasury, U.S. Department of Education and members of Congress for working hard and putting students and families first,” Matt Frendewey, vice president of strategy at yes. every kid., said in a press release. “This program has the potential to unlock billions of dollars in new education funding, giving families access to opportunities that can change the trajectory of a child’s life.

“For leaders in the 20 states that have not opted in, the choice is straightforward: Will they give families in their state access to the same opportunities?”

Of the states that have said they won’t join or are still deciding, all are led by Democrats. They have until Jan. 1, 2027, to indicate participation for the upcoming year, while the deadline to submit a list of qualified SGOs in the state is Feb. 15, 2027, according to yes. every kid.

“Now is the time for the remaining states to signal their participation,” stated EdChoice Senior Advisor of Legal Policy Leslie Hiner. “State leaders continuing to delay are not being cautious; they are gatekeeping, denying education benefits to families and students that can expand access to proven models of success, such as tutoring and school choice.

“Families have waited long enough.”

Among the uncommitted states, some Democratic governors said they were waiting for the federal guidelines to be released while facing pressure from both sides of the aisle.

For example, New York Gov. Kathy Hochul has resisted pressure from left-wing activists and voiced support for school choice but has yet to formally opt into EFTC.

In Connecticut, teachers’ unions have launched a campaign urging Gov. Ned Lamont to opt out.

Nevertheless, EdChoice polling suggests strong approval for the federal school choice program among voters.

Its September survey found that 77% of school parents and 64% of adults support their state participating in the tax credit. Only 11% of adults somewhat or strongly opposed participation.

Meanwhile, scholarship granting organizations are celebrating the potential to provide millions more students with funding for education.

“Treasury’s guidance marks another major step toward making the Education Freedom Tax Credit a reality for families across America,” commented American Federation for Children (AFC) CEO Tommy Schultz. “Allowing married couples filing jointly to contribute up to $3,400 will increase the ability for Americans to support scholarships and strengthen educational opportunities for children.

“We encourage every remaining governor to opt in and ensure families in their state can access expanded school choice.”

AFC notes that nearly 21 million children live in states that haven’t opted in. If all states participate, more than 50 million K-12 students would be eligible for EFTC-funded scholarships.

(Featured image: Treasury Secretary Scott Bessent)