A Philanthropic Path to Educational Freedom
In the nearly six years since the onset of the COVID lockdowns, which brought to light mass dissatisfaction with the school system, so much progress has been made on school choice. As both National School Choice Week and tax season are upon us, it’s worth noting one of the biggest advances in school choice that has occurred in this timeframe, while having gone mostly unnoticed: the federal tax credit scholarship program, as established by the One Big Beautiful Bill Act of 2025 (OBBB).
This is a dollar-for-dollar nonrefundable tax credit for up to $1700 for donations to qualified scholarship granting organizations (SGOs). That means that if an individual donates $1700 to an SGO, his or her total income tax liability goes down by $1700. In other words, the federal government, through the OBBB, has determined that it is worthwhile to forego that $1700 of tax revenue from an individual if he or she is funding the educational choice options of American children.
The mechanism of a nonrefundable tax credit is a direct repudiation of a line that is common among critics: “But doesn’t school choice divert funds from public schools?” Instead of allocating taxpayer dollars directly to SGOs, or to education bureaucrats, for that matter, this new program allows American taxpayers to directly support the organizations that they trust and that are helping students learn more effectively than the current system allows for. Philanthropy is always healthier than coercion, just as choice is always better than forcing students into schools in certain systems.
There is, of course, accountability for these SGOs. Per the federal tax credit scholarship program, SGOs must be registered nonprofits that provide scholarships to at least 10 students across multiple schools and that spend 90% or more of their revenue on scholarships. These scholarships are then able to be used for “qualified elementary and secondary education expenses,” including tuition, fees, tutoring, and other supports for students in public schools and private schools alike. The size of scholarship award is not limited by the OBBB.
What this means is that regardless of which educational option parents elect for their children, children receiving scholarship grants from SGOs have, at minimum, additional educational supports and supplements that they otherwise would not have had. Once again, the idea that public school students do not benefit from school choice programs is handily defeated with this tax credit: a student attending a public school could use a scholarship enabled by this program to get extra help in reading, for instance, taking pressure off the public school while allowing the student to stay enrolled in it.
Beyond that, any family that makes up to 300% of the area’s median gross income is qualified to receive scholarship funding from an SGO. This covers about 90% of American children, per analysis from the Urban Institute, meaning that the vast majority of students will be eligible for this credit.
But the overall success of this program is ultimately contingent on state opt-in. The OBBB specifies that the governor of any given state or other higher state tax authority has the final say on whether or not the federal tax credit scholarship program is implemented. As of January 2026, 21 states are on track to implement the federal tax credit scholarship program.
Time will tell whether the other 29 states and the District of Columbia implement it, too. Until then, one thing is for sure: the philanthropy-forward approach the OBBB takes to implement school choice is in the best interest of American students and American taxpayers alike. That gives us much to celebrate among all the other school choice accomplishments the 2020s have seen.
