Federal Scholarship Tax Credit makes perfect sense

The Federal Scholarship Tax Credit has the potential to benefit a broad range of families

Dr. Christopher Bott

Many Americans remember the discussions last year about the “One Big Beautiful Bill Act” and the ways it was intended to support ordinary families. Several provisions received significant attention, including eliminating taxes on tips and overtime income, providing additional deductions for seniors, and expanding the child tax credit. Less visible, but potentially more transformative for children and families, was another provision: the Federal Scholarship Tax Credit, which allows private donors to support students and families with educational expenses across the nation.

During congressional debate, the credit was modified and ultimately ratified with a provision requiring state governors to either opt in or opt out during the 2026 calendar year. In states that choose to participate, the tax credit will take effect on Jan. 1, 2027.

In states that opt in, individual taxpayers will be able to claim a 100 percent federal tax credit of up to $1,700 per year for donations made to nonprofit Scholarship Granting Organizations (SGOs). These organizations then distribute scholarships to families and students to help cover eligible educational expenses such as tuition, tutoring, technology, supplies and extended learning opportunities. If an individual donates $1,700 to a qualified SGO, that same amount can be subtracted from their federal income taxes owed. In other words, taxpayers can directly support students while receiving a dollar-for-dollar tax credit.

Scholarship Granting Organizations may be connected to both public and nonpublic schools. Public school foundations could also become SGOs and use these funds to support tutoring programs, academic interventions or educational materials for their students.

Simply put, students in every type of school, public or nonpublic, could benefit if New York chooses to participate.

Some critics have attempted to characterize this initiative as a school choice or voucher program. That description is inaccurate. The Federal Scholarship Tax Credit does not redirect public school funding. Instead, it encourages private charitable donations that help families meet the educational needs of their children. This distinction is important to identify. The program does not draw from state education budgets or local school district funds. Rather, it empowers individuals to voluntarily contribute to educational opportunities for students.

The Federal Scholarship Tax Credit has the potential to benefit a broad range of families. Students from households earning approximately $300,000 or less would be eligible to receive assistance. These scholarships could be used for tutoring, technology, extended-day programs, tuition and other educational initiatives that help children succeed. Equally important, the program comes at no cost to the state or local school districts. Instead, it channels private generosity directly toward educational opportunities.

The potential impact could be significant. According to Democrats for Education Reform, if just 15 percent of eligible New York State taxpayers contribute the full $1,700 and claim the tax credit, more than $750 million could be directed toward education in the state. If 30 percent participate, that number could exceed $1.5 billion in support for students. Without New York’s participation, those same dollars will simply go to students in other states or to the federal government. 

Governor Kathy Hochul must authorize the state’s participation before the law takes effect on Jan. 1, 2027, if New York is to participate. This step, known as the “opt-in” provision — would allow Scholarship Granting Organizations in New York to receive qualified contributions that benefit students across the state.

If you believe this opportunity makes sense for New York families and students, I encourage you to contact the governor and urge her to “opt-in” to the Federal Scholarship Tax Credit program.

Email the Governor:

https://www.governor.ny.gov/content/governor-contact-form

Call: (518) 474-8390

Write: Honorable Kathy Hochul

Governor of New York State Capitol

Albany, N.Y., 12224

You can also participate by utilizing the New York State Catholic Conference’s Action Alert System at the following link: https://www.nyscatholic.org/action-center.