The 2025 One Big Beautiful Bill Act (P.L. 119-21) created the Federal Scholarship Tax Credit (FSTC) that will go into effect at the beginning of 2027. The FSTC allows individuals to claim a federal tax credit each year of up to $1,700 for contributions to scholarships granting organizations, which then send funds to eligible students for qualifying elementary or secondary school expenses. Governors decide annually to opt in or out of this program. Regulations and guidance from the U.S. Treasury Department and Internal Revenue Service (IRS) that will likely provide key program details are forthcoming.The law establishes foundational requirements for the program that, coupled with information released previously by the Treasury and IRS, provide important information to understand the program. This slide deck is designed to serve as a primer about the program for states and other stakeholders and is based on information available as of July 15, 2026.
The Federal Scholarship Tax Credit: How It Operates, What It Means for States, and What Is Still Being Decided is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.
This resource was supported by the W. K. Kellogg Foundation and the Raikes Foundation. Core operating support for LPI is provided by the Heising-Simons Foundation, William and Flora Hewlett Foundation, Sandler Foundation, Skyline Foundation, and MacKenzie Scott. We are grateful to them for their generous support. The ideas voiced here are those of the authors and not those of our funders.
