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More than half the states — 27 — have indicated their desire to participate in the first nationally available federal private school choice tax incentive program as of April 15, according to the IRS.
Those states — ranging from Alaska to Florida and Montana to New Hampshire — have given advanced notice to the IRS that they will opt in to the Federal Scholarship Tax Credit program that was included in 2025’s “One Big Beautiful Bill.”
There is not yet a formal opt-in process for states, although the program is set to launch Jan. 1, 2027. On that date, individual taxpayers can begin to make charitable donations to be spent on K-12 services, including private school tuition and public school expenses.
Formal opt-in details are expected in a forthcoming U.S. Department of the Treasury notice of proposed rulemaking.
Only students living in a state that opts into the program will be eligible for a scholarship. States were offered the early opt-in process so scholarship-granting organizations that will manage and distribute the taxpayer donations can prepare for the tax credit program’s launch.
Taxpayers will be able to donate up to $1,700 annually to a scholarship-granting 501(c)(3) organization. They then would be eligible for a 100% federal income tax credit for their contributions.
On the student side, eligibility for scholarships is based on a household income up to 300% of an area’s median income, as defined by the U.S. Department of Housing and Urban Development.
Under those parameters, potential annual household income limits range from $585,600 in California’s San Jose-Sunnyvale-Santa Clara area to $113,100 in South Dakota’s Pine Ridge Reservation region, according to a reference map created by Doug Geverdt, a retired data program manager at the National Center for Education Statistics.
The states wanting to opt in
As of April 15, these are the states that indicated they want to opt into the Federal Scholarship Tax Credit program, according to the IRS:
Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
Debating state participation
There has been quite a bit of lobbying in states on whether to opt-in, despite states not having official rules from Treasury and the IRS on how the program will operate.
In Kentucky, for example, the state’s General Assembly approved a measure to opt in this spring, but Gov. Andy Beshear vetoed the vote. The General Assembly then overrode the veto.
A Kentucky constitution amendment to allow state funding for private school education was rejected by nearly 65% of voters in 2024, according to Ballotpedia.
Meanwhile, a bill under consideration in Colorado would require schools that enroll students who use a federal scholarship to comply with nondiscrimination requirements and laws concerning students with disabilities. Under the nondiscrimination requirement, participating schools would be prohibited from discriminating on the basis of students’ race, ethnicity, religion, sexual orientation, gender identity, family composition, language proficiency or other factors, according to the bill.
But in comments submitted to the Treasury Department, the Business Leadership Organized for Catholic Schools, a scholarship organization, urged the agency to prohibit states and governors from creating or imposing additional eligibility restrictions or regulatory conditions above what the federal program will require.
The debate is even reaching the local level. The Chicago Public Schools Board of Education voted April 8 to urge the Illinois General Assembly and Gov. JB Pritzker to reject any “legislation, administrative action, or federal incentive program that would create, expand, subsidize, or otherwise reintroduce school voucher programs” in the state.
Meanwhile, the America First Policy Institute, a nonprofit that supports private school choice, estimates that states that opt-out of the federal program will forgo nearly $23 billion over the next three years in combined tax credit eligible donations for education.
“This is a zero-cost, high-impact policy, yet non-participating states are effectively sending those resources to other states instead of supporting their own families,” said Erika Donalds, chair of Educational Opportunity at AFPI, in a March 30 statement.
Impacts to public schools
In Congress, 30 Democratic and Independent senators introduced legislation last week to repeal the Federal Scholarship Tax Credit program. The legislation is endorsed by 163 national and state organizations, according to a statement from Sen. Mark Kelly, D-Ariz., one of the main sponsors of the bill.
“In Arizona, we’ve already seen how universal vouchers are leading to rampant fraud and benefiting people who already had the means to send their kids to private school, while decimating public education for everyone else,” Kelly said in the April 15 statement. “If we want to keep improving education to build a better future for the next generation, we have to start with keeping public funds in public schools that serve all kids.”
Other lawmakers, educators and researchers are sounding the alarm on the negative impacts private school vouchers have on public school systems.
They point out that private schools do not need to comply with the Individuals with Disabilities Education Act — the nation’s special education law — or comply with other federal education civil rights rules. They also denounce a lack of transparency and accountability in private school voucher programs.
These programs can be especially detrimental to rural schools located in areas that may not have private school options, according to research released this month from the Economic Policy Institute.
Private school choice opponents say using taxpayer funds to support private school tuitions will mean there are fewer dollars to support public schools, which educate a higher portion of students.
“The establishment of a federal school voucher program is part of a broader assault on public education, one of the most important common goods underpinning American democracy,” said a February resource from Public Funds Public Schools, a project of the Education Law Center.
Still, since the federal private school choice program also provides scholarships that can be used for public school expenses like tutoring, some organizations such as Democrats for Education Reform are promoting state participation.
For example, a March DFER memo states that Georgia should leverage the Federal Scholarship Tax Credit program to expand tutoring and out-of-school time learning opportunities, in addition to directing resources to underresourced students and to trusted community-based organizations that provide academic and enrichment support.
The memo also called for innovative practices in Georgia like incentives to attract high-quality teachers and for reforms to the state’s education funding formula.
“Without renewed urgency and a forward-looking vision, Georgia risks the futures of tens of thousands of its students,” DFER CEO Jorge Elorza wrote. “The state’s concerning academic outcomes demand immediate action to avoid a generational loss of student potential, socioeconomic mobility, and economic productivity.”
