(UNITED STATES) – The Internal Revenue Service and the Department of the Treasury confirmed on Thursday that 27 states have joined the Federal Scholarship Tax Credit program, a new federal initiative that offers taxpayers a credit for donations to scholarship groups supporting private K-12 education.

The program sits inside the One, Big, Beautiful Bill Act, signed into law on July 4, 2025, and marks the first federal program to use a public tax incentive for private elementary and secondary educational expenses.

Frank J. Bisignano, chief executive officer of the IRS, said in Press Release IR-2026-76: “It’s encouraging to see that 27 states have already signed up to participate in this program that promotes and supports elementary and secondary education. We are hopeful that additional states will decide to participate.”

Individual taxpayers can claim a dollar-for-dollar nonrefundable federal tax credit of up to $1,700 for qualified contributions to approved Scholarship Granting Organizations, or SGOs.

States began the advance election process in early 2026, and the credit will first apply to the 2027 tax year, with returns filed in 2028.

Students qualify for scholarships if they live in households earning no more than 300% of the area median gross income (AGMI). SGOs must spend at least 90% of their income on scholarships and cannot earmark donations for specific students.

Treasury Secretary Scott Bessent described the coming rules in a statement issued on June 10, 2026. “Under President Trump’s leadership, we are taking a transformative step toward an education system that fits the student rather than the other way around. At Treasury, we take seriously the work of implementing this federal tax credit faithfully and effectively.”

Those early statements came as states moved to opt in under a structure Congress created last summer. The administration has cast the tax credit as part of a broader school choice push under the One, Big, Beautiful Bill Act, known in law as P.L. 119-21.

As of June 25, 2026, the participating states are Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.

That roster gives the program reach across the South, Mountain West, Midwest and parts of New England. It also leaves more than half the country outside the system for now, with federal officials publicly urging additional states to join.

The tax design allows a taxpayer in a participating state to redirect up to $1,700 in federal tax liability to an approved local scholarship organization. Because the credit is nonrefundable, its value depends on the taxpayer owing at least that amount in federal tax.

Money raised through SGOs is intended to fund scholarships for lower-income households rather than donor-directed awards. The ban on earmarking bars contributors from steering funds to a named child, while the 90% spending rule limits how much scholarship groups can hold back for administration or other costs.

Families seeking aid will face income screening first. Some non-citizen applicants may also face an added verification step because lawful presence can require confirmation through USCIS or the Department of Homeland Security before scholarship money is disbursed.

That immigration-related screening sits inside a much larger law that combined education, tax and enforcement provisions. The same One, Big, Beautiful Bill Act included $170 billion for border enforcement and new USCIS fees, including a $100 asylum application fee and a $250 visa integrity fee.

DHS Secretary Kristi Noem previously praised the broader law as a “win for law and order,” pointing to the homeland security and enforcement money included in the package. It also described $165 billion in homeland security and enforcement funding within the bill.

The education credit itself remains Treasury-led, with tax administration handled through the IRS. That division leaves education access, tax compliance and immigration verification intersecting in one benefit structure, especially for families whose eligibility may depend on both income records and lawful presence checks.

Federal officials have framed the new credit as an expansion of educational choice rather than a direct federal spending program. Congress structured it as a tax incentive for private donations, with scholarship organizations serving as the channel between donors and eligible students.

Supporters inside the administration have used expansive language about the program’s effect on schooling. Bisignano called it a program that “promotes and supports elementary and secondary education,” while Bessent said Treasury was working to implement it “faithfully and effectively.”

The timeline gives states and scholarship groups several months to prepare before any taxpayer claims the benefit on a return. Advance state elections began in early 2026, Treasury has previewed guidance, and taxpayers will not claim the credit until they file returns for the 2027 tax year in 2028.

That gap matters for SGOs because federal rules require them to build systems for compliance before contributions begin producing credits. They must qualify as approved organizations, track contributions, verify scholarship eligibility and show that at least 90% of income flows to scholarships.

Households that meet the income cap stand to benefit if scholarship supply develops quickly in participating states. In places with established private-school scholarship networks, the federal credit could add a new stream of money without requiring donors to increase their overall tax bill.

States that joined early also gain a head start in building administrative routines before the first filing season arrives. The list of 27 states suggests stronger early uptake in states that already have policy support for school choice or scholarship-based private education programs.

Federal agencies have already pointed people toward the main documents tied to the rollout, including IRS Press Release IR-2026-76, Treasury Guidance Preview and the USCIS Policy Manual for OBBBA updates.

Whether more states join before the first credit year opens will shape the program’s national footprint. For now, the Federal Scholarship Tax Credit exists on paper in 27 states, with taxpayers, scholarship groups and eligible families moving toward a system created by the One, Big, Beautiful Bill Act and scheduled to begin with returns filed in 2028.