Federal Scholarship Tax Credit Rules Released, Governors Have 3 Months Left to Decide

Final IRS rules on a federal school-choice tax credit could unlock $26 billion a year for private donors funding scholarships — but roughly 30 states haven't opted in yet. What the program does: The federal Scholarship Tax Credit, signed into law July 4, 2025, takes effect Jan. 1 and gives taxpayers a dollar-for-dollar federal tax credit (up to $1,700 for individuals, $3,400 for joint filers) for donations to Scholarship Granting Organizations (SGOs), which then fund scholarships for families' school of choice. The Treasury Department and IRS released 181 pages of final rules this week, with a public hearing scheduled for Dec. 15. The scale: Treasury and IRS estimate the program could support nearly 700 SGOs, with 11 million taxpayers generating $26 billion annually in private scholarship contributions by 2030. The credit is uncapped and has no sunset date — unlike Illinois' former Invest in Kids program, which ended in 2023. State opt-in required: States must affirmatively opt in annually for their residents to direct donations to in-state scholarships; around 30 states have done so, while others — including Illinois, Pennsylvania, and New York — have held off pending these rules. Children's Scholarship Fund president Darla Romfo argues it's not a legitimate concern that the program pulls money from public schools, noting it's privately raised money, not taxpayer dollars, and can also fund public-school resources like tutoring. She says states that don't opt in risk losing their own taxpayers' charitable dollars to other states' scholarship programs. Political backdrop: Illinois Gov. JB Pritzker previously said he wanted to see the rules before deciding, criticizing the broader push to shift public funds to private schools (even though program dollars are privately donated, not taxpayer-sourced). Virginia Gov. Glenn Youngkin has voiced support for the concept. Should your state opt in? Leave your thoughts in the comments. #SchoolChoice #ScholarshipTaxCredit #Education #CenterSquare #TheStates