Twenty-seven states have indicated they will join a new federal scholarship tax credit program set to launch January 1, 2027, according to the IRS. The states—ranging from Alaska and Florida to Wyoming and Montana—submitted advance notices signaling their participation in the Federal Scholarship Tax Credit (FSTC), created under the One Big Beautiful Bill Act signed into law on July 4, 2025.
The program allows individual taxpayers to donate up to $1,700 annually to Scholarship Granting Organizations (SGOs) and receive a dollar-for-dollar federal tax credit for their contributions. Beginning in 2027, participating states will enable SGOs to distribute these donations to students attending private schools or using education services like tutoring.
States must formally opt in for the program to operate within their borders. Only students living in participating states will be eligible for scholarships under the tax credit. Student eligibility is based on household income up to 300% of the area median income, as defined by the U.S. Department of Housing and Urban Development—a threshold that varies significantly by location.
The 27 states that have declared their intent to participate, as of April 15, 2026, 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 page shows 27 states have made advance elections as of May 15, 2026.
The advance opt-in process allows SGOs to prepare for the program’s launch before formal rules take effect. A Treasury Department notice of proposed rulemaking is expected to define the complete opt-in procedures and operational details.
Debate Over the Program’s Impact
The federal initiative has sparked significant debate. In April 2026, 30 Democratic and Independent senators introduced legislation to repeal the scholarship tax credit program, with 163 national and state organizations endorsing the repeal effort. Critics argue that private school choice programs lack transparency and accountability, and that private schools are not required to comply with federal special education law or other civil rights rules.
Opponents also contend that diverting tax dollars to private school scholarships reduces funding for public schools, which educate the majority of students. The Economic Policy Institute released research in April 2026 warning that private school choice programs can be especially damaging in rural areas with limited private school options.
Supporters counter that the program provides educational flexibility and can be used for public school expenses, including tutoring and enrichment services. The America First Policy Institute estimated that states opting out of the program would forgo nearly $23 billion over three years in combined tax credit-eligible donations.
Sources
- K-12 Dive — reported on 27 states indicating intent to participate as of April 15, 2026, provided list of participating states, and covered congressional repeal efforts and policy debates
- IRS (Internal Revenue Service) — official announcement of advance election process and list of 27 participating states as of May 15, 2026
- Congress.gov — confirmed One Big Beautiful Bill Act signed July 4, 2025, and program details
