Education savings accounts, tax-credit scholarships, vouchers, charter schools, home schooling, tutoring, course choice, dual degrees, and microschools are transforming K–12. In “Talking Choice,” Ashley Berner and I try to make sense of the shifting landscape. Ashley directs Johns Hopkins’ Institute for Education Policy and is a leading authority on “educational pluralism.” Whatever your take on educational choice, we seek to foster a more constructive conversation about what it means for students, families, and educators. Today, we focus on the federal tuition tax credit that President Donald Trump signed into law this summer.
—Rick

Rick: Ashley, I’ve been getting a lot of questions about the new federal tuition tax credit that passed as part of last summer’s huge reconciliation bill, also known as the “One Big Beautiful Bill Act.” And I know you’ve gotten similar queries. So let’s try to unpack what’s going on.

First off, readers should understand that the shape of the program is very much to be determined. Congress adopted a $1,700 tax credit for contributions to a “scholarship granting organization” (SGO) but only for SGOs in the states that opt into the program. Because it’s a “nonrefundable credit” and not a “deduction,” a taxpayer can write a check for up to $1,700 and subtract the full amount from the federal taxes they owe that year. This means that it’s costless for taxpayers to contribute, so long as the amount is less than they owe in federal taxes. The law also says that this federal credit cannot also be claimed as a state tax credit; it has to be one or the other.

There are also a number of rules regarding which SGOs are eligible. They must be a 501(c)(3) nonprofit, devote at least 90% of their income to scholarships for students within the same state, serve at least 10 different students at more than one school, and verify that students receiving the scholarship are from households earning no more than 300% of the area’s median income.

That much is clear. What’s less clear is how the program is actually going to work. That will depend on rules to be crafted by the secretary of the treasury and settled before the program actually launches in 2027. What kinds of scholarships can programs give? What expenses will scholarships be permitted to cover? Which states will opt in? How many students will be supported? How much money will taxpayers actually contribute?

A boatload of questions to be addressed. Ashley, I’m interested in your take on all this.

Ashley: You’re absolutely right that the mechanisms are very much “TBD!” The two big questions are the actual shape of the Treasury Department’s rulemaking and the number of Democrat-led states that will opt in.

So far, we know that the funds can be used for any number of expenses—from tuition to tutoring, room and board to school supplies, services for special education to extracurriculars. The bill itself does not specify whether students attending public schools are eligible—but rulemaking could and should, I’d argue, state this explicitly. If funds can be applied irrespective of a student’s school “sector”—district, private, charter, home—more states will opt in. Indeed, Democrat-led states will have a hard time arguing against participation under such circumstances.

Interestingly, the relevant state-sanctioned authority—whether that’s the governor, an agency, or an individual—needs to opt into the program by Jan. 1 of each year. Therefore, while the tax credit itself has no sunset and no cap, state participation could vary year by year. It’s not “one and done.” Governors in true-blue states like Illinois are currently under pressure from Republicans in the legislature who support choice mechanisms, but will it be enough in the short term? Other Democratic-majority states, such as Rhode Island, have small but long-standing education tax-credit programs. Will recipients and their allies carry enough political capital to mount a compelling case for opting in? In the longer term, will annual decisions become a meaningful factor in state elections? It’s too early to tell.

We will all be watching how this plays out in purple states, for sure. Look at North Carolina Gov. Josh Stein, who initially vetoed a bill to opt in but has signaled a willingness to reconsider once the rulemaking has clarified whether the funds could be applied to SGOs serving public schools. And while the teachers’ unions unstintingly oppose any deviation from the “public education = district schools” equation, Democrats for Education Reform, under the leadership of former Providence Mayor Jorge Elorza, is pushing the party to opt in on progressive and fiscal grounds.

Rick, what is your hunch? Will blue states opt in?

Rick: I certainly expect some blue states to opt in. But I think your “TBD!” applies here, big time. It depends on the rules that get written—will governors be allowed to add restrictions on top of the rules that Treasury issues? If yes, a lot of Democratic governors may opt in; if no, probably not. It also depends on how successful advocates like DFER are at mobilizing support on the left. It depends on whether this is seen as “free money for education” or as bending the knee to the Trump administration. Bottom line: I think it’s safe to say that red states will race to participate, purple states will mostly opt in, and blue states will be very much up in the air.

Another part of this, of course, are potential developments that we may not anticipate. There are at least three that loom large in my mind. One is the way this program may erode contributions to established, state-level tax credits. Because taxpayers can’t double-count contributions, and due to the generosity of the federal credit, it’s very possible those programs will shrink in importance. It’s not entirely clear what that would mean in practice, but it’s worth keeping an eye on.

I’m also wondering how many taxpayers will actually take advantage of the new program. While I’ve seen some huge projected numbers, those would require taxpayers to know about the tax credit, choose an SGO, actually make a contribution, and so forth. There’s a lot that could confuse people or lower participation rates, so we’ll have to see how this unfolds. After all, this isn’t about whether families like school choice or will opt into choice programs, but about what share of taxpayers will bother to make a contribution that doesn’t benefit them.

Finally, there are some downstream questions. This program is going to break new barriers as far as the federal government’s involvement in private school choice. In higher education, the Trump administration has broken new ground in showing just how aggressively officials can wield carrots and sticks. If we get a Democratic administration in January 2029, there are many questions about how they might alter or enforce the tax credit—with potentially profound effects for SGOs and participating private schools.

Anyway, if you’ve burning thoughts on any of that, I’d love to hear them. Otherwise, I’m very curious as to your predictions or best guesses as to how this plays out and how much it ultimately matters?

Ashley: Good questions. On whether this opportunity will undermine existing state education tax credits, it certainly could—especially in states that do not have corporate tax credits. Some (wealthier) individuals, of course, will be able to take credits against both federal and state tax liabilities. There isn’t a restriction on whether one could do both—only that the same money can’t count twice.

Like you, I do wonder about downstream effects, such as the federal program being used as a national partisan football. We have seen reversals at the state level, even with respect to wildly popular programs. Look at Illinois’ education tax credit, passed with bipartisan support in 2017 as part of a larger package of greater funding for district schools, only to be sunset by the legislature in 2023. While the federal program may become a fixture of tax policy, it is always possible that an unsympathetic administration could make the program less appealing for state SGOs and the private schools they support.

For me, the most important opportunity the federal program offers is yet another chance to shift the conversation away from a zero-sum game approach in which only one school sector “wins” and toward a more generous space in which we can support different approaches to schooling, as long as they successfully promote students’ academic learning. I don’t like the skills-based state tests—that’s what we should talk about next time!—but I cannot see my way to relinquishing the goal of academic quality and social opportunity for all students. After all, our Founding Fathers, state education laws, Supreme Court cases, and public reports across more than 200 years affirm that public education is meant to prepare the next generation for academic and civic success. Can we imagine a both/and, in which we champion a wide variety of school types and also assess student learning for results?