Dive Brief:
- The U.S. Department of Treasury and Internal Revenue Service are collecting comments from the public on a new federal tax credit program that will provide funds for K-12 services, including private school tuition, according to a Nov. 25 announcement by the IRS.
- The public comment period, which ends Dec. 26, seeks to gather input about several factors, including the policies and procedures guiding the scholarship-granting organizations that will distribute the funds. The information gathered will likely be used by the agencies to create a proposed rule.
- The first nationwide private school choice program was approved through the Republican-led “One Big, Beautiful Bill.″ Supporters say the program will expand educational choices for families, while critics say the tax incentive program will harm support for public schools and diminish educational equity.
Dive Insight:
The new law allows any individual taxpayer, beginning on Jan. 1, 2027, to donate up to $1,700 annually to a scholarship-granting 501(c)(3) organization. Donors could then be eligible for a 100% federal income tax credit for their contributions.
The funds generated could be used toward private school tuition at secular and religious schools, homeschooling materials, and expenses at public or private schools.
The IRS announcement about the initial comment period said the scholarships would be directed toward SGOs that serve elementary and secondary school students from low- and middle-income families. However, student financial eligibility 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.
For example, households in the Denver-Aurora-Centennial area of Colorado with income up to $420,300 would be eligible for the federal education tax credit scholarships. In Sheridan County, North Dakota, households could have an income up to $299,700 to be eligible, according to a reference map created by Doug Geverdt, a retired data program manager at the National Center for Education Statistics.
ACE Scholarships, a Denver-based nonprofit SGO that manages private school scholarships across multiple states, says the "inclusive income threshold" is estimated to include 85% to 90% of students nationwide who may be eligible for scholarships under the federal program.
To receive a scholarship, qualifying students must live in a state that opts into the program. The proposed regulation that the Treasury Department and IRS is expected to issue early next year will likely provide more details on opt-in procedures for states.
