Sponsors (28)
The bill expands federal tax incentives and legal protections to grow privately funded K–12 scholarships and broaden parental choice—particularly aiding low- and moderate-income families—while reducing federal revenue, raising oversight, equity, and public-school funding concerns.
Low- and moderate-income families (≤300% AMGI) gain access to taxpayer-funded K–12 scholarships that reduce out-of-pocket education costs and expand schooling options.
Individual taxpayers can claim a federal, dollar-for-dollar tax credit for donations to scholarship-granting organizations, creating a strong incentive for private support of K–12 scholarships.
Families whose dependents receive private K–12 scholarships can exclude those scholarship amounts from the student's gross income, making scholarship support effectively tax-free and increasing its household value.
Students and public school districts may lose enrollment and associated funding as scholarships divert children to private and religious schools, potentially reducing resources for public education in affected districts.
The combination of donation tax credits and exclusion of scholarship income will reduce federal tax receipts, which could increase the budget deficit or crowd out funding for other federal programs.
A $5 billion annual volume cap (2025–2028) with first-come, first-served allocation risks leaving many donors and eligible students without access to credits or scholarships if caps fill early in the year.
Based on analysis of 4 sections of legislative text.
Creates a federal tax credit for donations to scholarship organizations, excludes SGO scholarships from recipients' income, and protects participating private/religious schools from governmental conditioning.
Official title: To amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations to nonprofit organizations providing education scholarships to qualified elementary and secondary students.
Introduced January 28, 2025 by Adrian Smith · Last progress January 28, 2025
Creates a federal nonrefundable tax credit for individuals who donate cash or marketable securities to scholarship granting organizations (SGOs) that fund K–12 scholarships for eligible students, and excludes those scholarship amounts from a recipient’s taxable income. Defines eligibility (household income cap tied to area median income), allowable education expenses, and standards for SGOs; prevents federal, state, or local governments from conditioning or discriminating against private or religious schools or SGOs participating in the program. The bill applies to amounts received after December 31, 2024.