The Federal Scholarship Tax Credit: What It Could Mean for Our Students
A new federal program could bring expanded educational opportunity to families across New York — including the students and families we serve in Brooklyn and Queens. It offers tuition relief for families at Catholic and other private schools while also funding services that support public school students. But there’s one crucial step: New York only participates if Governor Kathy Hochul opts the state into the program.
The Tax Credit at a Glance
For Families
For Families
Who qualifies: Families earning up to 300% of their area’s median income, the large majority of households.
How to apply: Apply through an approved scholarship granting organization (SGO) like Futures in Education, operating in your state.
What it covers: A wide range of K–12 education expenses, the same categories allowed under a Coverdell education savings account (see FAQ).
Award size: Scholarship amounts are determined by each SGO.
For Donors
For Donors
The benefit: A 100% federal tax credit, not just a deduction, against your individual income tax:
- Up to $1,700 per taxpayer each year
- Non-refundable, with a 5-year carryover
- Cannot be directed to a specific student
- Cannot also be claimed as a federal charitable deduction
When: Begins in 2027; annual deadline is December 31.
Where: Available to donors in all 50 states and Washington D.C.
To whom: Donations go to approved SGOs.
How It Works
Any taxpayer who owes federal income tax can claim a 100% federal tax credit of up to $1,700 for donations to nonprofit Scholarship Granting Organizations (SGOs) — organizations like Futures in Education that award scholarships directly to students. That means donors can redirect up to $1,700 of what they’d otherwise pay the IRS toward student scholarships instead — at no net cost to themselves. Because the program runs on private donations rather than government spending, it creates new scholarship dollars without new state costs.
Scholarships can be used for a range of educational needs, including:
- School tuition
- Tutoring
- Special education services
- Educational technology
- Academic supplies and related supports
Why It Matters
If New York opts in, millions of dollars in privately funded scholarships could flow to students statewide through SGOs like Futures in Education — making tuition more affordable, expanding educational options, and strengthening the long-term stability of our schools. For many of the families we serve in Brooklyn and Queens, a scholarship is the difference between having real educational choices and having none.
The Timeline and the Decision
The credit takes effect on January 1, 2027. To participate, the governor must submit a list of approved SGOs to the U.S. Treasury Department each year — a list that scholarship organizations like Futures in Education could be part of. If New York doesn’t opt in, New Yorkers can still donate and claim the credit, but their dollars will fund scholarships for students in other states instead of our own. The decision rests with Governor Hochul.
Source: New York State Catholic Conference
Frequently Asked Questions
What is the Federal Scholarship Tax Credit?
It’s a new federal initiative designed to help families access the educational options that best fit their children’s needs. Taxpayers who owe federal income tax can claim a 100% federal tax credit of up to $1,700 for donations to nonprofit Scholarship Granting Organizations (SGOs), which then distribute the money as scholarships to eligible students. In effect, a donor redirects up to $1,700 of their federal tax bill to an SGO rather than paying it to the IRS.
How are the scholarships funded?
Entirely through private donations rather than government spending. Donors give to approved SGOs and receive a dollar-for-dollar federal tax credit in return, so new scholarship dollars are created without new public costs.
What can a scholarship be used for?
A wide range of K–12 educational needs, including:
- School tuition
- Tutoring
- Special education services
- Educational technology
- Academic supplies and other educational supports
Who is eligible to receive a scholarship?
Families earning up to 300% of their region’s median income — a threshold broad enough to include more than 90% of K–12 students in many areas, including a great many families here in Brooklyn and Queens.
How much can I donate, and what is the tax benefit?
Up to $1,700 per taxpayer each year, claimed as a 100% federal tax credit — not just a deduction. Because it’s a credit, it lowers your federal tax bill dollar for dollar, so the donation effectively comes at no net cost to you.
When would the program begin?
The federal scholarship tax credit is scheduled to take effect on January 1, 2027.
Will New York families be able to benefit?
Only if New York opts in. Federal law requires each state to participate by having its governor submit a list of approved SGOs to the U.S. Treasury Department each year. Whether New York families benefit rests with Governor Kathy Hochul.
What happens if New York doesn’t opt in?
New Yorkers could still donate and claim the federal tax credit, but their contributions would have to go to SGOs in other states — funding scholarships for students elsewhere rather than for families here in New York.