Treasury, IRS release proposed rules for Education Freedom Tax Credit
Reported byThe North State JournalBy A.P. Dillon
AI-assisted summary
The U.S. Treasury Department and the IRS have issued proposed regulations for the Education Freedom Tax Credit, a Trump administration school choice program set to start in 2027. In states that opt in, taxpayers could cut their federal tax bill dollar for dollar by donating to approved scholarship-granting organizations (SGOs), up to $1,700 a year, or $3,400 for joint filers. Thirty states, including North Carolina, have joined. To take part for next year's scholarships, states must opt in by Jan. 1, 2027, and finish their lists of approved SGOs by Feb. 15, 2027. Treasury projects that by 2030 the program could include 600 to 700 SGOs, over 11 million donors, nearly $26 billion in yearly gifts and up to 2.2 million scholarships.
Scholarships can pay for private school tuition or other expenses like tutoring, books and computers. Because public schools charge no tuition, money for public school students would go to those other costs. SGOs must spend 90% on scholarships, keep contributions in separate accounts, and serve at least 10 students from more than one school. Family income must generally fall below three times the area median, which Treasury says covers about 96% of children in participating states. States cannot set tighter limits than federal law.
The public can comment through the end of November, and a hearing is set for Dec. 15. North Carolina joined after lawmakers overrode Gov. Josh Stein's veto. Stein has argued the program takes money from public schools, though he has said it could fund services for public school students. Education Secretary Linda McMahon disputes that claim.
Why it matters
The rules would shape how scholarship money is raised and spent, which could affect families seeking private school or tutoring costs, public schools, and state officials. The open comment period lets residents weigh in before the rules are finalized.
- School choice
- Federal education policy
- State legislature
- School vouchers
- Public comment
Written with AI from the publisher's article and may contain errors. The original reporting is the authoritative source.
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- How could scholarship donations affect public school students and funding in our community, and what evidence would help us judge that?
- What should families, schools and state officials consider when deciding which scholarship groups are approved?
- Should residents submit comments on the proposed federal rules, and what questions should those comments raise?
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