- Individual donors may claim up to $1,700 annually; joint filers may claim up to $3,400.
- Student eligibility uses a household-income threshold below 300% of area median gross income.
- New Mexico’s Public Education Department expects to establish SGO certification in the coming weeks.
Checked against the IRS
Gov. Michelle Lujan Grisham opted New Mexico into the Federal Scholarship Tax Credit on November 4, 2026, drawing an immediate rebuke from the state’s two teacher unions. The federal program, created under the One Big Beautiful Bill Act, begins January 1, 2027.
The decision sets the state’s participation, not the start of the credit or approval of local organizations. Donors, K-12 families, scholarship organizations and educators will be affected as the program is put in place.
Whitney Holland, president of AFT New Mexico, and Bethany Jarrell, president of NEA New Mexico, objected in a joint statement. They called the move “nothing short of a betrayal” to students and families in public schools.
The credit is a federal tax benefit for eligible donations. Scholarships go to eligible students through organizations that must meet program requirements.
The governor says the credit can support students and public education
Lujan Grisham said the state should use the program to support education. “By participating in the FSTC, we will give New Mexico taxpayers the chance to keep some of their federal income taxes in New Mexico to support New Mexico students.”
The credit is established under Section 25F of the Internal Revenue Code. The governor’s statement tied participation to support for New Mexico students and public education.
State Sen. Gabriel Ramos, the Senate Education Committee’s ranking member, said the choice gives families more options for tutoring, services or a school. Bob Ippel, executive director of the New Mexico Association of Non-Public Schools, described it as a step toward giving people with fewer means more options.
Trey Smith, executive director of East Mountain Middle and High Schools, said public schools could benefit if they learn to use the program. Those potential benefits are supporters’ arguments, not established outcomes.
Union leaders warn the program could put public schools at risk
Holland and Jarrell characterized the tax credit as “a voucher scheme.” Their statement argued that donors could use contributions to reduce their federal tax bills. The unions said the approach could direct support toward private schools.
Holland also raised concerns about public-school enrollment and funding, as well as rural students who may not have access to private education. Those are concerns about possible effects, not findings that the opt-in has already changed school funding or enrollment.
Jarrell said educators had urged the governor not to participate. She said, “Every child deserves a well-funded, fully supported public school in their community, and this is just not the way to do that.”
Donors claim a federal credit for cash gifts, not their own tuition
The federal program applies to contributions made beginning January 1, 2027. The statute applies to taxable years ending after December 31, 2026. Treasury and the IRS issued proposed regulations on October 1, 2026; those rules are proposed, not final.
| Taxpayer filing status | Maximum credit for 2027 |
|---|---|
| Individual taxpayer | $1,700 |
| Married filing jointly | $3,400 combined |
The credit covers qualifying cash gifts to eligible scholarship granting organizations, or SGOs. It is nonrefundable, meaning it cannot generate a refund beyond the taxpayer’s available federal tax liability. Proposed rules would let taxpayers carry unused credit forward for up to five years.
A donor’s gift cannot be earmarked for a specific student. The contribution is not a credit for paying the donor’s own child’s tuition. Taxpayers may give to an eligible SGO even if they live outside the state where it operates.
The IRS description of the program sets out the federal framework. Some implementation details remain in proposed regulations.
Scholarship eligibility belongs to students, not donors
The student eligibility test is separate from the donor’s eligibility for a tax credit. A student may qualify when household income is less than 300% of the area’s median gross income.
SGOs award scholarships to eligible K-12 students attending public or non-public schools. Covered expenses may include tuition, tutoring, special-needs services, instructional materials, technology and supplies. A scholarship award is not automatic; it depends on applications and available SGO funding.
New Mexico still has to approve the organizations
The New Mexico Public Education Department must set up a certification process for organizations in the coming weeks. SGOs can apply after the department releases its guidelines. The state’s opt-in alone does not certify an organization.
