A new federal tax credit could bring meaningful new scholarship funding to private and religious schools starting in 2027. It is a genuine opportunity, and one worth understanding before you start counting on it.
The Basics
Starting with the 2027 tax year, donors can claim a dollar-for-dollar federal tax credit (up to $1,700) for contributions to approved scholarship organizations, which then award scholarships to families for tuition and related education expenses. No government money flows directly to schools. The funds come through private donations to these organizations. States have to opt in for their residents to participate, and a number are expected to do so as guidance rolls out later this year.
Built-In Protections for Schools
The law was written specifically to keep federal officials out of school decision-making, curriculum, admissions, and religious practice are all explicitly off-limits to federal regulators. Participation also does not turn a school into a recipient of federal financial assistance in the way that typically comes with a long list of federal strings attached, an important distinction from programs like Title IV funding in higher education.
One Thing Worth Thinking About
Even with those protections, it is worth being thoughtful about how much your school comes to rely on this funding over time. Programs like this exist under ordinary legislation rather than the Constitution, so a future Congress could change the terms down the road. Dependency on the funding itself can become a point of leverage later, even without the law changing today. It is a strong funding supplement, but probably not something to build your core budget around just yet.
State Rules Will Matter, Too
Because states must opt in, the day-to-day rules your school actually experiences may come from your own state’s legislation as much as from the federal law itself, including any reporting or other conditions a state decides to attach. That is worth watching closely as more states finalize their participation.
Consider How the Money Can Be Used
Scholarship dollars are not limited to tuition alone, these funds can also cover things like tutoring, technology, and supplies. This is a useful detail for admissions and development conversations with families, since it broadens the ways the program can support a family’s overall relationship with the school, not just the tuition bill itself. It is also worth knowing that donors cannot direct their contributions to a specific student, so funding tends to flow more broadly across a scholarship organization’s participating schools rather than being tied to any one family’s gift.
Timing to Keep in Mind
Federal guidance on how the program will actually operate is still being finalized, with more detail expected later this year ahead of the 2027 launch. Schools have some time to plan, but it is worth revisiting your approach once that guidance is out, since the fine print could shape how, and how much, this program ends up mattering for your enrollment and development strategy.
Takeaway
This is a promising opportunity for private and religious schools, but both the federal guidance and the state-level rules are still taking shape. We can assist you to think through what participation might look like for your school as more details become available.