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As part of last summer’s One Big Beautiful Bill, Congress created a program that gives a $1,700 tax credit for donating to organizations that give scholarships to K-12 students.
Millions of taxpayers could benefit from this tax credit. Instead of giving $1,700 to the IRS, they could give it to a scholarship-granting organization. Millions of students could benefit as well, getting to attend private school or take advantage of other approved educational expenses supported by the tax credit, including tutoring, special education services, and enrichment programs.
There is just one problem: Not enough people know about it.
We at EdChoice, in partnership with Morning Consult, polled parents and other Americans about the federal scholarship tax credit over the summer.
First, the good news. Both Americans in general and school parents in particular support the tax credit and want their state to opt in — 64% of Americans and 77% of parents support their state opting in.
Given that some estimates put 121.5 million taxpayers and 52 million students eligible for the tax credit, it could become a huge funding stream in American K-12 education.
But taxpayers and parents need to know about it.
Donors can start making contributions on Jan. 1, 2027, and then scholarship-granting organizations can start turning those donations into scholarships. But given that donors won’t claim the credit until they file their 2027 taxes, most likely in early 2028, they need to proactively elect to make contributions earlier. Parents need to know soon which organizations are participating so they can apply for scholarships for their kids.
Therein lies the rub. According to our polling, only 16% of Americans state they have heard “a great deal” or “a lot” about the federal tax credit. Another 23% say they have heard “some” or “a little” about it, which doesn’t feel like sufficient confidence to commit to donating $1,700. The numbers for parents are a bit better, with 27% of parents saying they have heard “a great deal” or “a lot” about the program and another 38% saying they have heard “some” or “a little” about it. But these numbers are far below the number of taxpayers and families eligible to participate.
To assess potential participation another way, we asked survey respondents whether they had participated in several other federal tax credits. For the Earned Income Tax Credit, 21% of Americans and 40% of parents reported participating. For the Child Tax Credit, it was 19% of Americans and 58% of parents.
The CTC numbers are particularly interesting because, according to the Tax Policy Center, around 90% of American families claim it. Around one-third claim the EITC, much closer to the percentage our survey respondents provided. It is quite possible that people have no idea that they are even claiming the CTC every year. They simply fill out their tax forms listing their children and wait for it to spit out what they owe or what they’re getting refunded, without fully appreciating why the number turns out the way it does.
The federal scholarship tax credit will not work so easily. It will take effort from both donors and parents to make donations or apply for scholarships. That’s more than ticking a box or listing a child.
If the federal scholarship tax credit is going to succeed, it is going to take a massive, national educational effort.
To get to taxpayers, employers could be a fruitful conduit. If employers decided to partner with scholarship-granting organizations, they could allow employees to opt in to the tax credit during onboarding or annual open-enrollment periods and then work with their payroll firm to deduct the donation and apply the credit so the person doesn’t “feel” it each month.
STATE TESTS ARE A TROJAN HORSE DESIGNED TO KILL SCHOOL CHOICE
To get to families, schools could be a fruitful conduit. They are already a location for information for parents and have a strong incentive to get students enrolled in scholarship programs that could provide funds to attend the school. Connecting with one principal could mean connecting with hundreds of families.
Those are just two quick solutions, but regardless of one’s thoughts on how best to tackle this problem, the most important thing to remember is the problem itself. A lack of knowledge of the tax credit could severely hamstring its success.
Dr. Michael Q. McShane is Director of National Research at EdChoice.
