The Trump administration has proposed regulations to launch a new federal school choice scholarship program designed to provide families with financial support for private schooling, homeschooling, and other educational expenses. Scheduled to begin on January 1, the Federal Scholarship Tax Credit aims to expand educational options for children in participating states by offering taxpayers a federal tax credit when they donate to scholarship organizations.
According to the Department of the Treasury, approximately 96% of children in at least 30 states will be eligible to apply for these scholarships. The program permits students already enrolled in public schools to use the funds for supplemental educational resources such as tutoring and special education therapies, a notable departure from many existing state programs that typically require students to leave public school to qualify.
U.S. Secretary of Education Linda McMahon emphasized the administration’s goal of “education freedom” and said the program would help ensure that children receive the education they need regardless of their geographic location or family income. Scholarship eligibility will be extended to students from families earning up to three times the median income in their area, meaning a household of four in Houston, Texas, with an income exceeding $300,000 could potentially qualify.
To reduce administrative barriers, applicants can submit proof of participation in a government assistance program instead of detailed income documentation. Foster children will be exempt from income verification altogether. However, federal officials acknowledge that other challenges, such as limited awareness of scholarship opportunities among eligible families, have hindered similar initiatives in the past. The government has not yet detailed outreach plans to increase public awareness.
Taxpayers nationwide can contribute to scholarship funds in any participating state, regardless of residency. Individual donations up to $1,700 will qualify for a dollar-for-dollar federal tax credit, with married couples filing jointly able to contribute double that amount. Scholarship organizations in each state will then allocate funds based on availability and student needs.
The range of qualified expenses covered by the scholarships includes tuition for religious or private schools, homeschooling costs, tutoring, special education services, and educational materials like books and computers. Federal officials have clarified that states cannot impose laws or regulations to limit the scholarships’ uses or restrict the types of organizations distributing funds, though participation in the program remains voluntary.
As of mid-September, 30 states have indicated participation for 2027, including Florida, Texas, Georgia, and Ohio, among others. Several states, including Arizona, Minnesota, Wisconsin, and Oregon, have opted out, citing concerns that these programs divert resources from public schools. New York’s Democratic Governor Kathy Hochul has expressed support, and the state is expected to join.
While proponents argue the federal program will channel substantial additional funding to students needing individualized support, critics warn that expanding school choice initiatives could exacerbate enrollment declines and funding cuts in public schools. Despite this, the federal program is projected to inject nearly $26 billion annually into as many as 2.2 million scholarships once taxpayer donations increase.
The Federal Scholarship Tax Credit was enacted last year via legislation included in President Donald Trump’s tax reform and spending cuts bill. The Treasury Department is currently accepting public comments on the proposed regulations for a 60-day period.