How the New Federal SGO Tax Credit Benefits Students in Every Learning Environment

The new federal SGO tax credit is designed to benefit qualified students across all types of schools by opening up new avenues of funding for education scholarships. These scholarship funds can then support qualified students in public, charter, private, and even many homeschool settings.

Let’s break down how it works and why it has the potential to expand opportunities for students across all types of schools.

What Is the New Federal SGO Tax Credit Program (aka School Choice Tax Credit)?

The new federal SGO tax credit is known by a lot of names, including The Education Freedom Tax Credit and the Federal School Choice Tax Credit. No matter what you call it, starting in 2027, tax-paying individuals can receive a dollar-for-dollar federal tax credit (up to $1,700) when they donate to a qualified nonprofit called a Scholarship Granting Organization (SGO).

These SGOs then use those funds to provide scholarships to qualifying K-12 students for a wide range of educational needs.

Here’s a simple visual to break down the process: Taxpayer → Donation → SGO → Student support

This is not a government spending program. Rather, this program encourages private giving by allowing taxpayers to redirect a portion of what they would owe in taxes to an SGO of their choice, helping expand educational opportunities for students across all types of schools.

A Key Point: This Is New Funding for Education

This program is designed to add resources to education, not redistribute them.

School budgets at the state and local level remain intact. At the same time, private contributions create new opportunities to support students with services and tools that may otherwise be out of reach.

Over time, this approach could deliver as much as $24 Billion in additional educational support to communities across the country. Here’s how this added support shows up across different types of schools.

How Public and Charter Schools Benefit

The vast majority of this country’s students attend public or charter schools, so that’s the natural place to start, and yet, the place where the impact of the federal tax credit is less immediately understood.

While public and charter school tuition is free, many families still face additional education-related costs. The good news is that scholarships from SGOs can help cover:

• Academic tutoring (including after-school support)
• Special education services
• Transportation costs
• School-required supplies and materials
• Education-related technology and internet access

In practice, this could mean helping a student improve in a challenging subject, access specialized support, or participate more fully in school.

These are everyday needs within public school communities—and this program helps provide additional support where it’s needed. 

But the benefits of the federal scholarship tax credit extend across other education settings as well.

How Private Schools Benefit From the Federal School Choice Tax Credit

The new federal scholarship tax credit (aka the federal school choice tax credit) carries many benefits for families seeking greater flexibility in their child’s education. Scholarships to private school students can help families:

• Access schools aligned with their needs or values
• Afford tuition
• Continue enrollment during financial hardship

This supports continuity for students and stability for schools.

The federal scholarship tax credit also strengthens the funding behind these scholarships. Because contributions are offset by a dollar-for-dollar tax credit (up to $1,700), more individuals may choose to give, helping expand and stabilize available support. As more states participate, this can create a more reliable funding base. 

And, beginning in 2027, scholarships will not be treated as taxable income, allowing recipient families to benefit from the full scholarship amount toward educational expenses. And the good news doesn’t stop here! In many cases, the benefits of these scholarships extend even beyond public and private school students.

How Homeschool Students May Benefit

The flexibility of the federal scholarship tax credit also extends to many homeschool situations. Homeschool students may benefit if they meet three key conditions:

• They live in a covered state
• They qualify as an eligible student
• They incur educational expenses connected to attendance or enrollment at a public, charter, private, or religious school

When those conditions are met, scholarships may be used for:

• Curriculum and learning materials
• Online or hybrid programs
• Tutoring and supplemental instruction
• Technology and internet access

Because homeschool guidelines vary from state to state, the way in which these requirements apply may differ. Nonetheless, the program can still provide meaningful support for many families.

Who Can Receive Scholarships and Why It Matters

This program is designed to be widely accessible. Students may qualify if they:

• Are eligible to enroll in a public K–12 school
• Come from households earning up to 300% of the area median income

This means a large majority of families—not just low-income households—may qualify.

At its core, this program recognizes that students have different needs—whether that’s tutoring, specialized support, or access to different learning environments. By freeing up resources to support those needs, a wide range of students benefit.

Research suggests that when families have access to additional educational resources, student outcomes can improve, parental involvement increases, and overall satisfaction with education rises. It’s a win-win-win!

At this point, you might be wondering, “How do I sign up?”

The Role of States

Participation in the program begins at the state level.

Each state must decide whether to opt in to the program. When a state participates, it can approve SGOs and unlock access to the federal scholarship tax credit for its residents—opening the door for students to receive additional educational support.

If a state chooses not to participate, those opportunities may not be available to families within that state. The good news is that many groups are advocating for state participation. To learn more, read How To Help Your State Opt In. 

What Is the School Choice Tax Credit and Other FAQs

The Big Picture: A Victory for Education

This program is not about one type of school or one type of student. It’s about giving a boost to students across all learning environments by:

• Adding new resources without replacing existing funding
• Addressing real student needs, from tutoring to specialized services
• Giving families more flexibility in how they support their child’s education

Whether a student attends a public, charter, or private school—or participates in homeschooling—the goal is the same: to give families more tools to support their child’s education.

While conversations around education can sometimes feel politically divided, this program offers a different approach. It is not about choosing sides—it is about helping students.

Students gain access to resources. Schools gain additional support. Donors gain the ability to direct their impact.

When all three align, the result is simple: a win for students, schools, and communities alike.

Recognizing the impact that this program can have, the attorneys at Gammon & Grange stand ready to help. Whether you are forming an SGO, navigating compliance requirements, or developing a thoughtful giving strategy, a nonprofit lawyer or tax attorney on our team can provide the clear legal guidance you need.

The information on this site is for general informational purposes only and is not legal advice. Federal and state requirements, rules, and guidelines may change at any time and can vary by jurisdiction. You should consult qualified legal counsel for advice tailored to your specific situation and circumstances.