The U.S. Department of the Treasury this morning released long-anticipated rules for the first-of-its-kind federal school choice program it’s launching this January—offering fresh details and raising new questions about student eligibility, public school participation, and protections against fraud and abuse.
Three months from the program’s start date, education experts and advocates of all stripes have had major unanswered questions about how the program will work, such as how much control states will have over how it operates, the extent to which home-school students will be able to benefit, and whether married couples will be able to claim larger tax credits.
Through the program, donors can claim dollar-for-dollar federal tax credits of up to $1,700 for contributions they make to scholarship-granting organizations (SGOs) that give out awards to students to cover private-school tuition, home-school expenses in some cases, and certain expenses for public-school students. Only students in states that opt in can receive the assistance.
During a call with reporters Wednesday afternoon, Treasury and Education department officials previewed the regulations and offered some answers to outstanding questions on the program’s operations. (Education Week plans additional coverage as we review the full, newly released regulations.)
States, for example, won’t be allowed to block certain types of scholarship-granting organizations, or SGOs, from accepting tax credit-eligible donations, or dictate to whom SGOs direct funds. Some Democratic policymakers have sought to allow only SGOs that give out scholarships to public school students or students from low-income families, as well as impose antidiscrimination and academic accountability requirements on SGOs and the schools and organizations that accept scholarship money.
Children from low-income families who already participate in public benefit programs or school-based tutoring programs will be automatically eligible to receive scholarships. And annual independent audits of SGOs will be required.
The regulations—which are open for public comment today through the end of November—also pave the way for scholarship-granting organizations to operate in multiple states, according to a news release announcing the regulations.
Officials on Wednesday said they hope the program will “give families more affordable options for their children’s education, whether that means attending a different school, getting additional tutoring, or accessing services that meet a particular child’s learning needs.”
They also emphasized that public school students can benefit—echoing a call from advocates in recent months for K-12 districts to pay attention to the program and position themselves to take advantage of potential new funding.
One family could use the scholarship funds for academic support for a child attending public school, while another could use the funds to cover tuition at a private or religious school, the Treasury official said.
The Education Department has no formal role in administering the program, according to the law that created it, but Secretary of Education Linda McMahon has called on governors to opt their states in and other agency officials have been promoting it. During Thursday’s call, the Treasury official said the two agencies had been partnering to develop the program.
What we know about the tax-credit program so far
The Federal Scholarship Tax Credit—also referred to as the Education Freedom Tax Credit, or EFTC—was signed into law last year by President Donald Trump as part of the broader tax and spending package known as the One Big Beautiful Bill Act.
Similar to tax-credit scholarship programs that already exist in 20 states, the federal one incentivizes taxpayers to donate money to organizations that grant scholarships to school-age students by giving them a dollar-for-dollar federal tax credit on donations up to $1,700.
Scholarship-granting organizations then provide students with scholarship funds they can spend on approved education expenses. The law is silent on the size of scholarship awards.
Under the federal law, eligible expenses include private school tuition, but also some expenses for public school students, such as tutoring, after-school programs, and other “supplementary” items.
The program’s most bullish advocates hope the volume of donations can help infuse billions of dollars into the nation’s decentralized education system, rivaling the size of longstanding federal grant programs like Title I for low-income students and IDEA for special education. Critics and skeptics fear the program’s design will benefit private education at the expense of public school systems.
Students are eligible for scholarships if they’re eligible to attend a public school in their state, and their family’s income doesn’t exceed 300% of their area’s median gross income—a generous threshold that’s as high as $616,500 in Santa Clara County, Calif., and as low as $107,100 in Oglala Lakota County, S.D., according to an analysis from EdChoice, an advocacy group.
But students can only receive scholarships in states where the governor has opted in. So far, 31 states—mostly led by Republican governors—have opted into the program or plan to, according to Education Week’s tracker.
Some governors have said they are waiting to see today’s regulations before deciding whether to participate.
Although students can only receive scholarships if their state is participating, taxpayers in any state can receive the tax credits the program offers. If their governor hasn’t opted in, they would have to donate to an SGO that serves students in a participating state.
States have until Jan. 1, 2027, to opt in for their K-12 students to receive scholarships next year. The deadline for states to finalize their SGO rosters is Feb. 15, 2027, the Treasury official said Thursday.
Several school districts—including in Clark County, Nev.; Columbus County, N.C.; Denver; and Gwinnett County, Ga.—have already made moves to partner with SGOs and offer services students can pay for with scholarship funds.
Meanwhile, legislation is pending in Congress to modify and repeal the program.
Rep. Adrian Smith, R-Neb., has introduced two bills—one that would repeal the opt-in requirement for states and make the program operational nationwide, and the other that would allow married couples to receive a $3,400 tax credit for a donation to an SGO, which is twice the the cap listed in the law.
Meanwhile, Sens. Mark Kelly, D-Ariz., and Mazie Hirono, D-Hawaii, introduced a bill to repeal the entire tax-credit scholarship program.
