More than 120 million taxpayers could claim education freedom tax credit in 2027, report estimates

An estimated 121.5 million Americans could qualify to use a new federal tax credit that rewards taxpayers for donating to K-12 scholarship programs beginning in 2027, according to a new report from the American Federation for Children (AFC) Growth Fund. 

The figure represents about 74% of U.S. tax filers and is more than double some earlier estimates of the potential donor pool, the school choice organization said in its Sept. 9 analysis. The report was written by AFC Growth Fund Senior Fellow Patrick Graff using recently released Internal Revenue Service Statistics of Income data.

AFC CEO Tommy Schultz said in a Sept. 9 press release that the program, known as the Education Freedom Tax Credit, has “created an unprecedented opportunity to open the doors of education freedom for families nationwide.

“Dr. Graff’s research demonstrates the life-changing difference taxpayers can make for American students by donating to a scholarship granting organization while reducing their own federal tax liability,” he added of the AFC’s report.

The program, enacted in 2025 as part of President Donald Trump’s “One Big Beautiful Bill,” allows individual taxpayers to claim a dollar-for-dollar federal income tax credit of up to $1,700 when they donate to approved scholarship granting organizations (SGOs). Those nonprofit organizations use the donations to provide K-12 scholarships that can cover eligible education expenses, including expenses for private school and homeschooling. The credit takes effect Jan. 1, 2027.

CatholicVote President and CEO Kelsey Reinhardt said the credit could provide a significant new source of support for Catholic schools, especially those that have faced challenges in recent years.

“Catholic schools that are faithful to their original mission are irreplaceable institutions through which the Church forms the next generation, and right now, too many of them are closing their doors,” Reinhardt told Zeale News. “The Education Freedom Tax Credit changes that calculus entirely.”

Reinhardt said that if just 5% of tax-paying Catholics participate, they can generate the resources needed to help “make possible the kind of Catholic schools across this country that truly teach the Gospel and students live it.” She said CatholicVote believes it can mobilize that level of participation among Catholics who prioritize “education, family, and the transmission of the faith.” 

“At CatholicVote, we are all in,” Reinhardt added. “We are ready to work shoulder-to-shoulder with dioceses, parishes, and Catholic organizations of every kind to ensure that our community understands what this program is, how it works, and how to participate. This is one of the most consequential opportunities for Catholic institutional life in a generation, and we intend to treat it that way.”

The AFC report estimates that 100.5 million taxpayers will owe at least $1,700 in federal income taxes in 2027, meaning they could potentially claim the full credit. Another 21.1 million are expected to owe less than $1,700 but could still claim a credit up to the amount of federal income tax they owe, according to the report.

AFC said even a relatively small share of taxpayers participating in the program could generate billions of dollars for student scholarships. 

If 5% of eligible taxpayers participated, the group estimates SGOs could receive about $9.4 billion per year. If 10% participated, that figure could rise to about $18.8 billion annually, and 20% participation could generate roughly $37.6 billion, according to the report.

“This research demonstrates the enormous potential of the Education Freedom Tax Credit,” Graff said in the release, adding that the potential new funding “represents a significant new opportunity to expand scholarships for students and bring greater educational freedom to public and private school families across the country, including in states where school choice options remain limited.”

States must opt in to the program before their students can receive scholarships. Participating states are also responsible for identifying qualifying SGOs and providing those lists to the federal government. 

According to AFC, 31 states had opted in or signaled their intent to participate as of September. Those states are home to an estimated 68.3 million taxpayers eligible to claim the credit. Another 53.2 million potential donors live in the 20 states or jurisdictions that had not yet committed to participate.

Students receiving scholarships generally must come from households earning no more than 300% of their area’s median income and must be eligible to enroll in a public elementary or secondary school.

A separate AFC analysis estimated earlier this year that approximately 51.7 million children nationwide could meet the federal requirements to receive scholarships through the program.