Sponsors (92)
Introduced January 31, 2025 by Adrian Smith · Last progress January 31, 2025
The bill expands private K–12 scholarship access and creates sizable tax incentives for donors—improving options for many families—while reducing federal revenue, risking pressure on public-school funding, and adding administrative and oversight trade-offs.
Low- and moderate-income students (households ≤300% of area median) gain expanded access to K–12 scholarships that can pay tuition, tutoring, therapies, and other qualified expenses, increasing private-school and supplemental-education options for eligible families.
Taxpayers who make qualified contributions receive a federal tax credit backed by a national $10 billion annual cap, creating a predictable, scalable incentive for private donations to scholarship-granting organizations beginning in 2026.
Parents and families receiving scholarships can exclude those scholarship amounts from taxable income, reducing their federal tax liability and increasing the practical value of awards to recipients.
The credit and the exclusion of scholarship amounts from income will reduce federal tax receipts, increasing deficits or requiring spending offsets or revenue adjustments elsewhere in the budget.
Public school districts may lose students and associated state/local funding if families shift to private schools using scholarships, potentially straining resources for remaining public students and programs.
The program risks skewing benefits toward donors and families able to access private education (including higher- and some middle-income households), reducing the progressivity of federal tax support for education.
Based on analysis of 5 sections of legislative text.
Creates new federal tax credits for individuals and corporations that donate to scholarship-granting organizations (SGOs) which fund K–12 scholarships for eligible students. Sets a $10 billion annual national cap on credits with a per-state reservation, requires SGOs to follow audit, eligibility, and anti‑self‑dealing rules, excludes scholarship amounts from a dependent’s taxable income, and bars government entities from treating participating private or religious schools or SGOs as governmental actors or disadvantaging them. Credits and the income exclusion take effect for taxable years ending after December 31, 2025, and contributions are allocated by the IRS on a first‑come, first‑served basis subject to the annual cap and state reservations.