Federal Education Tax Credit

A New Federal Tax Credit for Education Giving

What is the new federal scholarship tax credit?

Federal legislation signed into law in July 2025 constitutes a historic expansion of K-12 educational opportunity that will benefit millions of students for years to come. The statutory mechanism to affect this opportunity is that all individual income taxpayers, beginning in 2027, can take a 100 percent tax credit for up to $1,700 on an annual basis for donations to a non-profit scholarship granting organization (SGO) that in turn awards scholarships to students to help pay tuition, tutoring, supplies and other eligible education expenses. Thus, up to $1,700 can be subtracted from the donor’s federal income taxes owed if they make qualified donations of up to that amount. This would be in lieu of a charitable deduction, and taxpayers need not itemize on their tax returns to obtain this dollar-for-dollar tax credit.

This tax credit cold be a major boost for education freedom, permanently increasing the funds available for organizations like BISON Children’s Scholarship Fund to award scholarships, giving many more parents a choice and children a chance.

State Opt-In

Under the newly passed bill, states will have to opt-in and provide a list of qualified scholarship granting organizations (SGOs) eligible for donations to the U.S. Treasury Department. Individuals in any state will be able to give to qualified SGOs and get a dollar-for-dollar federal tax credit of up to $1,700, but the SGO will only be able to use the contribution for scholarships in a state that has opted in. Details about the opt-in process and the approval process for eligible SGOs will be provided by the Treasury Department in their forthcoming regulations-

Why should NYS opt-in?

All students in public and non-public schools, from households with incomes of approximately $300,000 or more would be eligible to benefit. Scholarships can be used for extended day programs, tutoring, technology, tuition, and other eligible educational expenses.
There is no cost to state or school district budgets; rather, this measure puts more money in the hands of families to be spent on their children’s education.
Makes school choice available to students in all 50 states with the opt-in decision from the Governor.
Failure to opt-in will result in millions of dollars in New York taxpayer donations benefiting children in other states that do opt-in, since all residents with federal individual income liability can donate to eligible SGOs. According to Democrats for Education Reform, if just 15% of eligible New York taxpayers make annual donations of $1,700 and take the tax credit, more than $750 million will be added to education; If 30% of taxpayers donate that maximum, over $1.5 billion will benefit New York students. (Otherwise, these funds will help children in other states).

Federal Tax Credit

Want more information?

Check out FAQ’s for more information and sign up to receive updates on the federal tax credit.