Federal Education Freedom Tax Credit Program

The Federal Education Freedom Tax Credit Program, also known as the Federal Tax Credit Scholarship Program, is a provision of the One Big Beautiful Bill Act passed by the 119th United States Congress and signed into law by United States President Donald Trump in July 2025. The program allows taxpayers to claim up to $1,700 in credits for donating to designated organizations that fund scholarships for K-12 education.[1]

Description

According to the congressional source,

Under the program, taxpayers will be eligible to receive a tax credit of up to $1,700 for the value of cash contributions to certain scholarship granting organizations (SGOs). These organizations, in turn, will be required to use these contributions to grant scholarships to students at private and public elementary and secondary schools located within their states.[2]

To qualify for eligibility, the income of the students' families must be below 300% of their area median income. Students must use the funds for designated school-related expenses. Individual states may choose whether to recognize the eligibility of SGOs within their jurisdictions.[2]

Participation

Because of the wording of the law, state governors have the choice to opt into the program. The first to do so, in January 2026, was Glenn Youngkin of Virginia,[3][4] who said in a statement that the decision "empowers parents and helps ensure students, especially those with the greatest needs, can choose the learning environment that is right for them." The Virginia Education Association, a labor union representing teachers in the state, condemned the announcement, citing possible financial affects on public schools.[5]

Soon after, Alabama Governor Kay Ivey signed an executive order confirming the state's participation in the program.[6] Governors of Iowa,[7] Arkansas,[8] and South Dakota[9] announced their states' participation as well.

Reception

Proponents of school choice hailed the program, with the American Enterprise Institute calling it "the largest and most consequential federal victory ever for educational freedom and school choice."[10] Critics have characterized the program as a "national private school voucher program funded through tax breaks for the wealthy that threatens to dismantle our system of public schools."[11]

See also

References

  1. ^ Nguyen, Jessie (January 10, 2026). "Virginia opts in to federal Education Freedom Tax Credit program, VEA condemns move". WRIC ABC 8News. Archived from the original on January 15, 2026. Retrieved January 18, 2026.
  2. ^ a b "Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law". www.congress.gov. Retrieved January 18, 2026.
  3. ^ Nguyen, Jessie (January 10, 2026). "Virginia opts in to federal Education Freedom Tax Credit program, VEA condemns move". WRIC. Retrieved January 18, 2026.
  4. ^ Olinger, Heather (January 9, 2026). "Virginia is first state to opt in to federal education freedom tax credit; what that means for families". WVVA. Retrieved January 18, 2026.
  5. ^ Lundy, Kathleen (January 13, 2026). "State leaders, educators clash after Virginia opts into federal school choice tax credit". 13NewsNow. Retrieved January 18, 2026.
  6. ^ Keel, Ava (January 16, 2026). "Alabama joins federal education freedom tax credit program". WDHN. Archived from the original on January 17, 2026. Retrieved January 18, 2026.
  7. ^ "Iowa joins federal education tax credit program". KCRG. January 5, 2026. Retrieved January 18, 2026.
  8. ^ Farrar, Thomas (January 16, 2026). "Arkansans will soon be able to claim tax credits for donating to Scholarship Organizations". KATV. Retrieved January 18, 2026.
  9. ^ Seamer, Cooper (November 14, 2025). "Rhoden says state will opt in to federal education tax credit program". Dakota News Now. Retrieved January 18, 2026.
  10. ^ "One Big Beautiful Step Toward Education Freedom: How the Federal Scholarship Tax Credit Became Law". American Enterprise Institute. Archived from the original on January 14, 2026. Retrieved January 18, 2026.
  11. ^ Alcantara, Jessica; Petty, Laura (July 2, 2025). "Trump's 'Big Beautiful Bill' Will Devastate Public Schools. America's Kids Will Pay the Price". Time. Retrieved January 18, 2026.
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