Thirty states have opted into a new federal scholarship program that begins accepting donations on January 1, 2027. The scholarships can cover curriculum, tutoring, books, technology, and other K–12 expenses.
For homeschool families, though, eligibility may come down to an old question: does your state legally consider a homeschool a school?
The Education Freedom Tax Credit gives taxpayers a dollar-for-dollar federal tax credit of up to $1,700 when they donate to an approved Scholarship Granting Organization, or SGO. Those organizations then award scholarships to eligible students.
For homeschoolers, two things matter:
Your state must participate in the federal program.
Your state must classify your homeschool in a way that satisfies the federal definition of a school.
Some states meet both requirements. Others do not.
What the law does
Congress created the credit in the July 2025 reconciliation law, P.L. 119-21, and added it to the tax code as Section 25F. The Departments of Education and Treasury call it the Education Freedom Tax Credit. You may also see it described as the federal scholarship tax credit.
The basic process works like this:
A taxpayer donates cash to an SGO approved by a participating state. The taxpayer can claim a nonrefundable federal income tax credit of up to $1,700. Any unused credit can be carried forward for up to five years.
The SGO must spend at least 90 percent of its income on scholarships for eligible K–12 students.
There is no federal cap on an individual scholarship award. Each SGO can set its own award amounts, priorities, and application rules.
The program is funded through private donations rather than state or local education budgets.
Who qualifies for a scholarship
Federal law sets two basic requirements.
The student must be eligible to enroll in a public elementary or secondary school, and household income cannot exceed 300 percent of the area's median gross income.
That second requirement is important because it is based on area median income, not the federal poverty level.
For example, if the area median income in your county is $90,000, the income limit would be $270,000.
That means many middle-income families may qualify.
Qualifying does not guarantee a scholarship, however. Each SGO decides who receives an award and how much each family receives. Available funding will also depend on how much donors contribute.
A family may qualify under federal rules and still receive a smaller award than expected—or no award at all if demand exceeds available funds.
And even a meaningful scholarship may only cover part of what homeschooling costs over a full school year.
The two rules homeschool families need to watch
1. Your state has to participate
A state becomes a "covered state" when its governor, or another official designated by state law, files IRS Form 15714 and publishes a list of qualifying SGOs.
Thirty states had opted in as of late July 2026.
The governors of Hawaii, Minnesota, New Mexico, and Oregon have said they will not participate. Oregon Governor Tina Kotek declined in June after reviewing Treasury's initial guidance.
You can check your state's page for current information.
If your state does not participate, an SGO in another state cannot simply award your child a scholarship instead. An approved SGO may only fund eligible students within the state where it is listed.
A state can also join through legislative action. North Carolina did so in June 2026 after its General Assembly overrode Governor Josh Stein's veto.
2. Your state has to consider your homeschool a school
This is where things get complicated.
Section 25F uses the definition of qualified education expenses found in the Coverdell rules under Section 530. Those rules refer to expenses connected with a public, private, or religious school "as determined under State law."
In June 2026, Treasury indicated that a homeschool would qualify as a school when state law treats it as one.
So the answer can vary from state to state.
Texas is fairly straightforward. The Texas Supreme Court has treated homeschools as private schools since its 1994 Leeper decision, and Texas has opted into the federal program.
Other states are less clear.
Arizona, for example, defines a homeschool as a "nonpublic school" but separately defines a "private school" as an institution other than the child's home. Arizona has also not opted into the federal program so far.
California allows some homeschool families to operate by filing a private school affidavit, but California has not opted into the program either.
If you are unsure where your state falls, start with how your state classifies homeschooling. Your annual homeschool notice, affidavit, or registration paperwork may also show the legal category your state uses.
What a scholarship can pay for
Treasury and Education have described a broad range of qualifying K–12 expenses, including:
Tuition and fees
Academic tutoring
Books and instructional materials
Educational technology
Transportation
Career-training equipment
Certain services for students with disabilities
For homeschool families, that could include expenses ranging from a first-year curriculum to weekly tutoring.
But the federal list is only the outer limit.
Each SGO can decide which qualifying expenses it will actually cover. An organization focused primarily on private-school tuition, for example, may choose not to reimburse homeschool curriculum or technology.
State law matters here too. If federal rules require an expense to be connected with a legally recognized school, homeschool families in states that classify home education separately may have fewer qualifying expenses.
The same curriculum could qualify in one state and not another simply because the two states define homeschooling differently.
When the program starts
Families cannot apply for these federal scholarships yet.
Treasury and the IRS opened a request for comments in December 2025 and allowed states to file advance elections for 2027.
In June 2026, Deputy Assistant Secretary for Tax Policy Kevin Salinger said proposed regulations were expected by the end of September 2026. States, SGOs, and taxpayers are expected to be able to rely on those rules for the 2027 tax year.
Eligible contributions begin January 1, 2027.
Participating states must also publish their approved SGO lists. Scholarship applications should begin opening during 2027, although the timing will vary by organization and state.
Families will apply directly through an SGO, not through a federal agency.
States that already operate tax-credit scholarship programs may have organizations that are well positioned to participate in the new federal program. More concrete application information should become available later in 2026.
How this works with ESAs and state tax breaks
The Education Freedom Tax Credit is separate from state education savings accounts, or ESAs.
If your state offers an ESA, that program will continue to have its own eligibility rules, funding limits, and requirements. We cover those programs in which states offer ESAs.
State tax credits and deductions are separate as well. Those programs generally reduce taxes based on education expenses a family has already paid rather than distributing scholarship money through a nonprofit.
Our state-by-state homeschool tax credit guide covers those programs in more detail.
What homeschool families should do now
There is not much you need to do yet.
Before 2027:
Confirm whether your state has opted into the program.
Find out how your state legally classifies homeschooling.
Check your household income against 300 percent of your area's median income.
Watch for Treasury's final guidance on how homeschool expenses will be treated.
It is also a good time to keep your homeschool records organized. SGOs may require documentation showing education expenses or student eligibility, and good records will make the application process easier.
Most importantly, don't count on scholarship money in next year's homeschool budget yet.
The federal tax credit is now law. Homeschool families may benefit from it. But exactly who qualifies—and what homeschool expenses SGOs will be allowed to cover—still depends heavily on state law and the federal rules being finalized for 2027.
