Sponsor
Cindy Hyde-Smith
Senator · R-MS
Senator · R-MS
The bill provides refundable, inflation-protected tax relief for taxpayers (especially middle-class families) but limits the benefit with a per-taxpayer cap and delays/smooths inflation adjustments, trading broader coverage for fiscal predictability and administrative simplicity.
Taxpayers (especially middle-class families) will get a refundable tax credit up to $1,700 per taxpayer (or $3,400 on joint returns), providing predictable, direct tax relief.
Taxpayers will see the credit amount indexed to inflation after 2026, helping preserve the credit's real value over time.
Taxpayers and tax preparers will have clearer timing because the IRS must publish the adjusted limitation by November 1 each year, aiding planning and compliance.
Taxpayers (particularly middle-class families) with eligible expenses above the credit cap may still face out-of-pocket costs because the credit is limited to $1,700 per taxpayer.
Taxpayers will not benefit from inflation adjustments for the 2026 tax year because indexing begins for taxable years after December 31, 2026, reducing the credit's real value in 2026.
Taxpayers may experience small gains or losses year-to-year because annual inflation adjustments are rounded to the nearest $50, producing step changes that don't exactly match inflation.
Based on analysis of 2 sections of legislative text.
Imposes a $1,700 per-taxpayer cap (double for joint filers) on the federal scholarship contribution tax credit and requires inflation indexing with annual adjustments rounded to $50.
Official title: Amend the Internal Revenue Code of 1986 to modify the credit amount for qualified elementary and secondary education scholarships.
Introduced August 6, 2026 by Cindy Hyde-Smith · Last progress August 6, 2026
Sets a per-taxpayer dollar limit on the federal tax credit for donations to scholarship organizations: $1,700 for single filers and $3,400 for joint filers, and requires the amount to be indexed for inflation beginning after 2026. The change applies to taxable years starting after December 31, 2025, and directs annual adjusted limits to be published by November 1 each year. Also specifies the inflation-adjustment method, uses a rounding rule (nearest $50) for annual adjustments, and substitutes a particular calendar-year base reference in the indexing calculation. The act itself is two short sections: a short title and the amendment to the Internal Revenue Code provision for the tax credit cap and indexing rules.