Why Every State Should Be Opting In to the Federal Education Freedom Tax Credit Scholarship Program

Beginning January 1, 2027, the new federal Education Freedom Tax-Credit Scholarship Program will begin offering individual taxpayers a dollar-for-dollar tax credit of up to $1,700 for their contributions to eligible scholarship-granting organizations (SGOs). These SGOs will provide scholarships to K-12 students whose household income is below 300% of their area’s median income, and families can use them to pay for a wide variety of educational expenses, including tuition, fees, books, supplies, tutoring, transportation, and more. However, the program can only distribute scholarships in states that have opted to participate.

For state lawmakers, the program’s immense benefits are obvious: opting in gives families more educational freedom without the need for any state funds. Parents are always in the best position to recognize their child’s educational needs, and the Education Freedom Tax-Credit Scholarship Program helps turn those needs into actual learning options for families. This is exactly why 29 states have already opted into the program well in advance of its start date.

Voters, especially parents, are ready for this kind of opportunity. Recent EdChoice polling shows that about 70% of school parents and 60% of American adults support their state participating in the Education Freedom Tax-Credit Scholarship Program. Opposition was also extremely low, with just 9% of parents and 11% of adults saying they were against the program. Notably, the same polling found that 38% of parents and 20% of adults said they were very or extremely likely to donate to an SGO in exchange for the federal tax credit. This is a significant early indication that the program could generate significant funding for student scholarships.

We know that participating states and their families stand to gain immense educational benefits by using the program. Equally as important, however, is what states stand to lose by not opting into the program. According to the America First Policy Institute, the 21 states that have not yet opted in stand to miss a collective $22.4 billion in scholarship contributions, amounting to more than 4 million missed scholarships, between 2027 and 2029. States with the most to lose include California ($4.91 billion), New York ($2.37 billion), Pennsylvania ($1.97 billion), and Illinois ($1.97 billion).

However, there is a critical aspect of this program that is not widely reported but has potentially major implications for states that fail to opt in. Since this is a federal program, any taxpayer in any state can obtain the credit so long as they donate to an SGO that is participating in the program. Therefore, a donor in California who wants to support the program can still receive the tax credit by contributing to an SGO in Texas. The net result is that California not only misses out on those contributions, but they actively encourage California taxpayers to support students and families outside the state.

The Education Freedom Tax-Credit Scholarship Program is a generational opportunity for every state. States that have opted in are prioritizing parents and students over systems of education while unlocking tens of millions, if not hundreds of millions, of dollars in potential annual scholarship funds at no cost to the state. Opting in to this program is the easiest and most commonsense step a state can take toward unlocking more learning options for students and families.