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The Trump administration will launch a new federal school choice tax credit program on Thursday, January 1. The Education Freedom Tax Credit, part of the Republicans’ 2025 tax and spending bill, allows individuals and organizations to donate to non-profit Scholarship Granting Organizations (SGOs) and receive a dollar-for-dollar tax credit—up to $1,700 for individuals and $3,400 for married couples filing jointly. These SGOs then use the funds to offer K-12 scholarships for students to cover private school tuition, homeschooling costs, tutoring, school supplies, and more.
According to the Treasury and Education departments, rules released Thursday mean the program could fund as many as 2.2 million scholarships each year by 2030, at an annual cost of nearly $26 billion. The new tax credit is intended to expand educational choices for families across the country, with approximately 96% of children in participating states eligible to apply. The money can be used by both public and private school students for a range of educational expenses, not just tuition.
President Donald Trump and Education Secretary Linda McMahon, say the policy will “supercharge” education, giving families more freedom and flexibility. Administration officials argue that the program meets individual student needs better than a one-size-fits-all system.
Eligibility for the scholarships requires family income below three times the median for their area, adjusted for size. The program also aims to make it easier for low-income and foster children to apply, allowing proof of participation in government programs instead of additional paperwork. According to the Treasury Department, taxpayers can donate to SGOs in any participating state, not just their own.
As of mid-September, 30 states, including North Carolina, Virginia, Colorado, and New York, have opted to join. Governors have until January 1 to decide whether their state will participate, and states that opt out could lose millions in federal funding.
A 60-day public comment period is now open before final rules go into effect. Donations and scholarship applications will begin January 1, and participating states must submit lists of approved SGOs by February 15.