Twenty-seven states have elected to participate in the Federal Scholarship Tax Credit program, the Internal Revenue Service announced on June 8, 2026, with the initiative set to launch on January 1, 2027. The program enables eligible taxpayers to claim a federal tax credit of up to $1,700 for qualified contributions to Scholarship Granting Organizations (SGOs) that provide scholarships for elementary and secondary education expenses.
According to the IRS announcement, the participating states are Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming. The IRS said it will maintain and update the official list as additional states complete the required election and submission process.
The tax credit program, enacted under the One, Big, Beautiful Bill, operates on a simple principle: individual taxpayers can redirect up to $1,700 of their federal tax liability to nonprofit organizations that award scholarships to students. The credit is dollar-for-dollar, meaning a $1,700 contribution results in a $1,700 reduction in federal taxes owed. State participation in the program is entirely voluntary, allowing governors and legislatures to decide whether to opt in.
IRS Chief Executive Officer Frank J. Bisignano said in a statement: “It’s encouraging to see that 27 states have already signed up to participate in this program that promotes and supports elementary and secondary education. We are hopeful that additional states will decide to participate.” The program represents a significant shift in how federal tax policy can fund school choice, allowing private donors to support K-12 scholarships rather than the government allocating education funds directly.
For taxpayers to claim the credit, they must contribute to an SGO located in a participating state and the SGO must submit a list of qualified organizations to the IRS. Beginning in 2027, eligible students from families earning no more than 300 percent of the area median income can receive scholarships for tuition at private schools, tutoring for public school students, and other qualified education expenses. The credit is permanent and uncapped, meaning there is no annual limit on total contributions across all taxpayers.
Sources
- Internal Revenue Service — Official announcement (IR-2026-76, June 8, 2026) that 27 states have elected to participate in the Federal Scholarship Tax Credit program and listing participating states
- Education Commission of the States — Analysis of how the federal tax credit scholarship program may affect states and school choice
- U.S. Department of Education — Fact sheet on the Education Freedom Tax Credit explaining program mechanics and eligibility
- EdChoice — Details on how the federal tax credit for scholarships works and what it means for families and donors
