Twenty-Nine States Opt Into Education Freedom Tax Credit Program

The Education Freedom Tax Credit (EFTC) was included in a reconciliation bill passed last summer. It permits taxpayers with a federal tax liability to donate up to $1,700 to support education and receive a dollar-for-dollar tax credit. Starting in 2027, these donations will go to scholarship granting organizations (SGOs), which provide scholarships for K-12 students.

Federal taxpayers in any state can participate in the program and receive the tax credit. However, only students in states that have opted in are eligible to receive the scholarships. The program is designed to have no impact on federal, state, or local education budgets.

states have opted into the EFTC through various methods. Most opt-ins have come from states with Republican governors. States with Democratic governors that have opted in include Colorado, Kentucky, and Kansas. North Carolina's legislature may attempt to override a potential veto by Governor Josh Stein in an upcoming session.

for Non-Participating States If

a state does not opt in, donations from its residents may flow to SGOs in other states, benefiting students elsewhere. For example, Pennsylvania could miss out on an estimated $2 billion in scholarships over three years unless it opts in. ” The EFTC scholarships could address issues such as waitlists for charter schools and private scholarships in the state.

The program is intended to help families afford education options, including for low-income students, those with special needs, and others. Taxpayers in all states will have the option to donate starting in 2027, regardless of their state's participation status.

The article was written by Marc LeBlond, who serves as the External Relations Director for the American Federation for Children.