Married couples can claim $3,400 school scholarship tax credit under new Treasury rules
School choice advocates welcomed the announcement and urged more states to join the program before its January 2027 launch.
Married couples filing jointly can claim up to $3,400 a year in federal tax credits for qualifying cash donations to K-12 scholarship organizations beginning in 2027 under proposed Treasury rules released Oct. 1, drawing praise from school choice advocates.
The clarification would allow each spouse to claim the $1,700 credit available to an individual taxpayer, resolving concerns that married couples filing a joint return would be limited to a single credit.
Tommy Schultz, CEO of the American Federation for Children (AFC), welcomed the announcement in an X post, calling it “HUGE news.” The AFC Scholarship Fund estimated that allowing both spouses to claim the credit could increase potential donations nationwide by $75.1 billion.
“2027 is THE tipping point for K-12 charity in America,” Schultz said in his post. “And millions of students will benefit.”
The Treasury estimated that, by 2030, more than 11 million taxpayers could contribute nearly $26 billion annually to 600 to 700 scholarship granting organizations (SGOs), supporting as many as 2.2 million scholarships a year.
“Under President Trump, this Administration continues to transform America’s education system to meet the needs of each student,” Treasury Secretary Scott Bessent said in the department’s release. “The Education Freedom Tax Credit marks a new chapter in educational freedom and opportunity by establishing America’s first nationwide school choice program and empowering states to give students and families more options.”
EdChoice also welcomed the announcement, with President and CEO Robert Enlow saying the tax credit “has the potential to be a significant new funding source for students learning at the elementary and secondary levels who need help accessing additional educational resources.”
How the tax credit works
The federal scholarship tax credit, which takes effect Jan. 1, 2027, allows taxpayers to claim a dollar-for-dollar federal income tax credit when they donate to approved SGOs. Those nonprofit organizations then use the donations to provide K-12 scholarships that can cover eligible education expenses such as private school tuition, books, supplies, tutoring, and services for students with special needs.
Unlike a deduction, which reduces taxable income, the credit reduces the tax bill itself. For example, an individual with a $4,800 federal income tax bill who makes a qualifying $1,700 donation could reduce that bill to $3,100. Taxpayers would claim qualifying donations made in 2027 on their 2027 returns, generally filed in 2028.
The credit is nonrefundable, meaning it cannot reduce a taxpayer’s income tax liability below zero. Taxpayers can carry unused credits forward for up to five years.
The Treasury and the Internal Revenue Service (IRS) also issued temporary regulations establishing procedures for states and scholarship organizations to prepare for the launch. Taxpayers, states, and organizations may rely on the proposed rules for qualifying contributions beginning Jan. 1, 2027.
Which states are participating?
States must opt in to the program and identify qualifying SGOs before their students receive scholarships. Taxpayers can donate to an eligible organization in a participating state regardless of where they live.
According to a September IRS list, 30 states have so far formally elected to participate in the program for 2027: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming. New York Gov. Kathy Hochul has also announced plans for her state to participate.
In an Oct. 1 AFC statement, Schultz urged the remaining governors to opt in before the program launches. The group said there are nearly 21 million students in the states that have not yet opted in. It estimated that participation by every state would make 52 million children eligible for scholarships.
“Ahead of the January 1 launch, we encourage every remaining governor to opt in and ensure families in their state can access expanded school choice,” Schultz said, adding that his organization “will continue to open the doors of education freedom for families nationwide.”
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