Key points:
“Public schools stand at the starting line of this new journey.”
For the first time, a federal tax credit is opening a clear path for public school students to access expanded learning opportunities through Scholarship Granting Organizations (SGOs). This moment invites school leaders to step forward, prepare thoughtfully, and turn a new funding stream into real gains for the students they serve every day.
Scholarship Granting Organizations have long been a familiar tool in private education. These independent 501(c)(3) nonprofits collect private donations and award scholarships that help families cover educational costs. For years, they primarily supported students attending private schools. That landscape is changing. Under the One Big Beautiful Bill Act, signed into law in July 2025, a new federal tax credit creates a meaningful opportunity for public schools and the students who attend them.
Beginning January 1, 2027, individual taxpayers can contribute up to $1,700 per year to a qualified SGO and receive a dollar-for-dollar federal income tax credit. The credit reduces the donor’s federal tax liability dollar for dollar during tax filing season. It is nonrefundable and limited to the amount of the donor’s federal tax liability, but for many taxpayers it effectively makes the contribution cost-free. Currently, there is no nationwide cap on the total amount of credits that can be claimed.
States must elect to participate and provide the IRS with a list of approved SGOs. Once a state opts in, residents and others can direct contributions to those organizations. The SGO then awards scholarships to eligible K–12 students, those enrolled in an elementary or secondary school and whose household income does not exceed 300 percent of the area median income. That income threshold covers the large majority of American families.
Scholarship funds can be used for qualified expenses, which include: academic tutoring, special needs services and supports, books, supplies, equipment, after-school programming, and other education-related costs. Treasury will provide additional guidance on qualified expenses later this year.
