Starting January 1, 2027, a taxpayer can redirect up to $1,700 of federal income tax into a K through 12 scholarship fund. The IRS gives every dollar of that donation back as a tax credit. The fund then pays for tuition, tutoring, books, and curriculum for eligible students. I've been reading the statute and the Treasury previews the way I read a lease: slowly, and hunting for fine print.
This guide covers the federal scholarship tax credit homeschool families keep asking me about. You'll learn what the credit is, the two ways your family can take part, who qualifies for a scholarship, and which states are in as of September 2026. I'll also lay out a timeline through the 2027 filing season and show what a realistic scholarship buys in curriculum.
What the Federal Scholarship Tax Credit Is (and Is Not)
The credit lives in Section 25F of the tax code, created by the July 2025 reconciliation law most people call the One Big Beautiful Bill Act. The IRS calls it the Federal Scholarship Tax Credit, or FSTC. Treasury and most advocacy groups call it the Education Freedom Tax Credit. Same program, two names.
You give cash to an approved nonprofit called a scholarship granting organization, or SGO. On your federal return, you subtract that gift from your tax bill, dollar for dollar, up to $1,700 per year. The SGO uses the money to award scholarships to K through 12 students in its state.
That makes it a donor credit, not a family account. An ESA puts money in an account with your child's name on it. This program puts money in a nonprofit's account, and the nonprofit decides who gets a scholarship. You can't earmark your donation for your own kid.
A few details matter for planning. The credit is nonrefundable, so it can't exceed what you owe in federal tax, though unused credit carries forward for up to five years. It shrinks by any state tax credit you claim for the same gift, and you can't take a charitable deduction for the same dollars. The IRS page on the Federal Scholarship Tax Credit lays out these rules and links to the list of participating states.
One more rule shapes everything else. A state has to choose to participate and hand the IRS a list of its approved SGOs. No list, no scholarships for families in that state.
How the Federal Scholarship Tax Credit Works for Homeschool Families
Homeschool families sit on both sides of this program. You can be a donor, a recipient, or both in the same year.
Side One: Redirecting Up to $1,700 as a Donor
If your household owes at least $1,700 in federal income tax, you can move that amount into scholarships at no net cost. You write a check to an SGO in a participating state during 2027, keep the receipt, and claim the credit on the 2027 return you file in 2028. Whether joint filers get one $1,700 cap or two is a detail I expect Treasury's proposed rules to settle.
Two points people miss. First, you don't have to live in a participating state to donate. An Arizona or Minnesota taxpayer can give to a Texas SGO and still claim the credit. Second, the money has to go out in 2027 or later, so a gift made in December 2026 earns nothing under this section.
Side Two: Receiving a Scholarship Through an SGO
The bigger opportunity for most homeschool families is the scholarship itself. To qualify, a student must be eligible to attend a public elementary or secondary school. Household income must also sit at or below 300 percent of the area median gross income, a figure HUD updates every year.
That threshold is generous. EdChoice estimates it covers roughly 90 percent of K through 12 students nationwide. Its 2026 figures put the line at $332,100 for Marion County, Indiana, and $133,200 for Greene County, Alabama. The EdChoice parent's guide to the federal tax credit for scholarships has a zip code lookup for your area.
Each SGO runs its own application and sets its own award sizes. The law requires SGOs to spend at least 90 percent of donations on scholarships and serve at least 10 students across more than one school. They must also give priority to students who received a scholarship the year before, and to their siblings. Treasury's June preview added a yearly independent audit for every SGO.
The catch for homeschoolers is the word "school." Qualified expenses are tied to enrollment or attendance at a school as defined by state law. In Treasury's June 2026 preview of its Education Freedom Tax Credit guidance, homeschools count as schools where state law treats them that way. In states that file home education under a separate category, a child can be fully eligible and still have nothing a scholarship is allowed to pay for.
At least 28 states don't currently define homeschools as schools, by the AFC Scholarship Fund's count. Texas, by contrast, has treated homeschools as private schools since a 1994 court ruling. Parents at our daycare in Brooklyn ask me about this program every week, usually for an older sibling, and my first question back is which statute they file under.
What a Scholarship Can Pay For
The expense list borrows from Coverdell education savings accounts, Section 530 of the tax code. It covers tuition and fees, academic tutoring, books, supplies and equipment, computer technology and internet access, and services for students with special needs.
For a homeschool family in a state that treats the home as a school, that reads like a curriculum shopping list. Workbooks, a science kit, an online math program, a tutor for algebra, and standardized test fees all fit the categories. In my house, that would cover my 6th grader's science materials, my 3rd grader's math and reading workbooks, and a tutor for whichever subject I'm losing patience with.
Treasury has said detailed guidance on qualified expenses is a separate workstream, so expect more specifics after the September rules. Two guardrails apply either way. The SGO pays or reimburses qualified expenses rather than handing your family cash, and it can only fund students in the state where it's listed.
Where the School Choice Tax Credit Stands State by State
The school choice tax credit map changes monthly, so treat this as a snapshot dated September 1, 2026. On June 8, the IRS announced that 27 states had made an advance election to participate. By late August, Ballotpedia's tracker counted 30 states that had formally opted in. New York's governor said in May that she intends to join once she has reviewed the federal rules.
Who Is In and Who Is Out
In the South and central states, that means Alabama, Arkansas, Florida, Georgia, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia. The rest are Alaska, Colorado, Idaho, Indiana, Iowa, Montana, Nevada, New Hampshire, North Dakota, Ohio, South Dakota, Utah, and Wyoming.
For families who use ArgoPrep through state programs, the federal scholarship tax credit news is mostly good. Texas, South Carolina, Utah, Alabama, Arkansas, New Hampshire, and North Carolina are all in. North Carolina got there in June, when the legislature overrode the governor's veto.
Two of our ESA states are out for now. Arizona's governor vetoed opt-in bills in January and again in April, saying she wants federal guidance before committing. Minnesota's governor said in March that the state would not participate. Hawaii, New Mexico, and Oregon have declined as well, and Wisconsin's governor has said no.
Pennsylvania, Michigan, and a handful of other states were still undecided as of this writing. As of late August, no state had published a certified SGO list, because everyone is waiting on Treasury's proposed regulations. Donations can't start until January anyway, so the delay hasn't cost families anything yet.
How It Stacks With State ESAs and Tax Credits
The federal scholarship tax credit doesn't replace a state ESA, and nothing in Section 25F blocks a child from having both. States and SGOs can set their own priorities, though, and Treasury's rules could add conditions. Treat your ESA as the base budget and a federal scholarship as a possible bonus, never the other way around. This homeschool cost breakdown walks through what a typical year runs per child before any funding at all.
Texas is the clearest example. The new Texas Education Freedom Accounts give homeschoolers $2,000 a year starting this school year, and Texas is also opted in to the federal program. A Texas family could hold a TEFA account and apply to an SGO for a second award in 2027.
Minnesota shows the other side. Its K-12 Education Credit still helps homeschool families on their state return, but the governor has kept the state out of the federal program. Minnesota donors can still give to an SGO in another state and claim the $1,700; Minnesota students just can't receive the scholarships. Arizona families are in the same spot, with a large state ESA and no federal scholarships for now.
Federal Education Tax Credit 2027 Timeline: What to Do and When
Here is the federal education tax credit 2027 rollout as I understand it, with one task for each step.
- September 2026. Treasury has said it expects to publish proposed regulations by the end of the month. Once they land, check whether your state has opened SGO certification.
- October through December 2026. States certify SGOs and submit their lists to the IRS, due by January 1. Watch your state's education or revenue site and bookmark the SGOs that serve homeschoolers.
- January 1, 2027. Donations start earning the credit. If you plan to give, do it early in the year so the SGO has funds to award for fall.
- Winter and spring 2027. SGOs open scholarship applications. Expect to upload proof of income, proof of residency, and evidence that your child is enrolled in a school as your state defines it.
- Fall 2027. The first scholarships pay for the 2027 to 2028 school year in most states. Keep every receipt, because SGOs need your documentation to pass their audits.
- Early 2028. Donors claim the credit on their 2027 federal return. Families who received a scholarship should ask their preparer whether anything needs to be reported.
In late August, a coalition of education groups asked Treasury to lower the paperwork burden on SGOs, which tells you the rules are still being argued over. My own plan is to donate in January and to keep checking whether my home state of New York actually files its list. A press release in May is not a list in December.
What a $1,500 or $2,000 Scholarship Buys in Curriculum
This is the part of the federal scholarship tax credit homeschool families care about most: what the money actually buys. Nobody knows the average award yet, because each SGO decides. For planning, I'll use $1,500 and $2,000, since those match what several state programs already give homeschoolers.
Start with a full year of core practice. The 3rd Grade Ultimate Bundle is $199.99 for 10 workbooks across math, ELA, science, and social studies, which works out to about $20 per book. That's what my middle kid is working through this year, and every question has a video explanation, so I'm not the only teacher in the room.
With a $1,500 award, that leaves about $1,300. I'd put $600 toward a weekly tutor for the subject your child fights you on and $300 toward a science kit and supplies. Set aside $150 for a year-end standardized test and hold the last $250 for a mid-year course correction.
At $2,000, I'd add the 12-month online subscription at $179.76 for video lectures, quizzes, and drills, then raise the tutoring line to $800 and keep the rest in reserve. Scholarships are per student, so a family with two eligible kids could run this plan twice. Either way the math stays simple: about $200 buys the year's core practice, and everything after that is support and enrichment.
A Homeschool Family's Checklist for the Scholarship Tax Credit
Print this, or paste it into whatever you use to run your homeschool.
- Confirm whether your state has opted in, and check again in October, when SGO lists are due to the IRS.
- Look up how your state classifies your homeschool. If you file under a private school statute, you're in a strong position. If not, ask your state homeschool association what it's hearing.
- Run the income test. Find 300 percent of your area's median income on EdChoice's lookup tool and compare it to last year's household income.
- Decide whether you'll donate. If you owe federal tax, budget $1,700 for January 2027 and pick a scholarship granting organization that serves homeschoolers.
- Gather documents now: proof of residency, last year's tax return, and whatever your state issues to homeschools, such as a notice of intent or a private school registration.
- Price out a full year of curriculum per child, so you can apply with a real number instead of a guess.
- Keep every receipt from the day a scholarship arrives; the SGO will need them for its audit.
Planning Curriculum Purchases Around the Credit
Scholarship applications will ask what you plan to buy, and a grade-level bundle is the easiest line item to justify. ArgoPrep's Ultimate Bundles cover PreK through 12th grade, with 10 workbooks for most grades and a video explanation for every question. Match one to each child's grade now, and your curriculum budget will be ready before the first SGO opens its doors.
