Beginning January 1, 2027, many taxpayers will be able to take advantage of the Federal Tax Credit Scholarship Program.[1] Passed as one of the many initiatives in the One Big Beautiful Bill in July 2025, the Federal Tax Credit Scholarship Program offers single filers up to $1,700 ($3,400 for married filing jointly) in credit when they donate to a qualifying scholarship granting organization (SGO).[2] The goal of this tax credit is to provide students and parents with a greater variety of educational opportunities.[3] The U.S. Department of Education cites increases in civic engagement, academic performance, and overall happiness as a few of the many outcomes that Americans can expect through this new federal initiative.[4] Many U.S. states, such as Arizona and Florida, have already enacted similar programs at the state level.[5]

SGOs receiving these tax-deductible contributions can then distribute the funds to qualifying students and families to cover costs associated with tuition, school supplies, and computer technologies.[6] To qualify, a student must be part of a household “whose family income is below 300% of their area median income.”[7] For example, the 2024 median household income for Tampa, Florida was $75,475.[8] Under the Federal Tax Credit Scholarship Program, a student whose family earns below $226,000 would qualify for this assistance. Hence, millions of Americans will become eligible to offset educational expenses for which they currently must pay out of their own pockets.[9]

Although the program might initially appear attractive to both taxpayers and students, state governments are already encountering significant difficulties in administering existing voucher programs.

Following an audit of its existing voucher program – called the Family Empowerment Scholarship Program (FESP) – the Florida Legislature discovered that the FESP had mismanaged designated funds by not properly paying schools for the services they had performed.[10] These findings prompted the Florida legislature to look deeper into the current operations and ultimately propose a reform: Senate Bill 318 (SB 318). SB 318 sets forth procedural safeguards to increase accountability for the proper distribution of funds and how schools in turn use the allotted funds.[11] Thus, the need for reform in Florida is just one example of how existing educational voucher programs require significant oversight, because even well-intended programs sometimes fail to achieve their desired outcomes.

Likewise, Arizona has experienced significant complications in its own voucher system, where at least twenty public schools have closed over the past few years due to lack of funds and reduced public education enrollment.[12] Students and parents in Arizona are opting to enroll in private and charter schools due to the voucher program creating greater flexibility for families to tailor their child’s educational experiences, rather than simply attending the closest public school.[13] This has led to crisis in the Arizona public educational system, which has prompted  legislators to consider reforming the program, similar to what Florida has already done.[14]

Given the existing lack of accountability in existing state programs, it is not entirely clear how the federal government will address these issues. One known provision in the Federal Tax Credit Scholarship Program guidelines requires any recipient SGO to maintain separate accounts for the funds received.[15] While this is a step in the right direction towards transparency, this provision does not detail specifically how the funds will be tracked or spent for each scholarship-receiving student.[16] This is similar to the issue that Florida attempted to address by passing SB 318.[17] The Federal Tax Credit Scholarship Program, however, does expressly prohibit “earmark[ing] or set[ting] aside contributions for scholarships on behalf of any particular student,” which will hopefully ensure a more equitable distribution of funds.[18]

Every child that elects to attend a private or charter school redirects funds away from the existing public schools who often receive funding based on enrollment. The strain then shifts to private schools to accommodate the additional enrollment, where funding for specialized programs is often unavailable.[19] One Florida private educator reported record enrollment for the 2025-2026 school year, citing an overall student increase of almost 14% since 2023 – the year when Florida’s school voucher program was enacted.[20]

However, increased private school enrollment could serve to improve the education quality in places where the Federal Tax Credit Scholarship Program is utilized. The desire to attract new students could lead to healthy competition among private schools, where educators are encouraged to adopt new teaching methods and student programs. Thus, competing private schools could operate in a similar fashion to the open commodity market where competition breads innovation.

While this increase in students at private schools will likely continue due to more states opting in to the Federal Tax Credit Scholarship Program, any contributions made through the federal program are limited by an existing state program.[21] Thus, a joint-filing family claiming a state credit would be unable to claim the full $3,400 federal tax credit.

Opponents of school choice often cite Constitutional objections to school voucher programs, but those objections have proven unsuccessful at the Supreme Court.[22] Some scholars suggest that the only chances of success are state constitutional objections.[23] Alternatively, proponents of school choice focus on the individualized benefits that a student can receive by attending a school that can more closely personalize their learning needs.[24] Students who excel in particular curricula may opt for a school that is able to foster a deeper study of those subjects, whereas a public education is often subject to “one-size-fits-all” curricula.[25] While opponents of voucher programs don’t often disagree on the benefits of specialized education that a child can receive, they disagree over public funds going toward to private schools, many of which are religious.[26]

In total, the Federal Tax Credit Scholarship Program seeks to offer parents and donors greater freedom in how their money is allocated towards educating the next generation. The federal program will expand private educational opportunities for many students who would otherwise not be able to afford a private education. Most notably, states like Florida have already experienced failures to properly and timely pay participating schools. Other states, like Arizona, have had to confront the growing challenge of declining public-school enrollment and funding. However, the looming issues of funding oversight and management along with potentially overburdened private school enrollment may limit the program’s effectiveness, as we have seen in numerous similar state programs.

[1] Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law, CONGRESS.GOV, https://www.congress.gov/crs-product/R48724 (last visited March 27, 2026).

[2] Id.

[3] Fact Sheet: President Trump Delivers Affordable School Choice Options Through Education Freedom Tax Credit, U.S. DEPT. OF EDUC., https://www.ed.gov/media/document/education-freedom-tax-credit-fact-sheet-113147.pdf (last visited March 27, 2026).

[4] Id.

[5] Empowerment Scholarship Account, AZ DEPT. OF EDUC. (Feb. 9, 2026), https://www.azed.gov/esa; Family Empowerment Scholarship, DEPT. OF EDUC., https://www.fldoe.org/schools/school-choice/k-12-scholarship-programs/fes/index.stml (last visited March 27, 2026).

[6] Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law, CONGRESS.GOV, https://www.congress.gov/crs-product/R48724 (last visited March 27, 2026).

[7] Id.

[8] QuickFacts: Tampa city, Florida, U.S. CENSUS BUREAU, https://www.census.gov/quickfacts/fact/table/tampacityflorida/PST045224 (last visited March 27, 2026).

[9] Melissa Kollar & Zach Scherer, Income in the United States: 2024, U.S. CENSUS BUREAU (Sept. 9, 2025), https://www.census.gov/library/publications/2025/demo/p60-286.html.

[10] Danielle Prieur, Audit of Florida’s voucher program finds overspending, underfunded public schools, WUSF NPR (Nov. 20, 2025), https://www.wusf.org/education/2025-11-20/audit-of-floridas-voucher-program-finds-overspending-underfunded-public-schools.

[11] S.B. 318, 2026 Gen. Assemb., Reg. Sess. (Fla. 2026); Douglas Soule, Florida Senate passes overhaul of private school vouchers, WUSF NPR (Jan. 15, 2026), https://www.wusf.org/politics-issues/2026-01-15/florida-senate-passes-overhaul-private-school-vouchers; Danielle Prieur, Audit of Florida’s voucher program finds overspending, underfunded public schools, WUSF NPR (Nov. 20, 2025), https://www.wusf.org/education/2025-11-20/audit-of-floridas-voucher-program-finds-overspending-underfunded-public-schools.

[12] Arizona public schools closing as voucher programs gain popularity, EDSOURCE (Aug. 5, 2025), https://edsource.org/updates/arizona-schools-closing-as-vouchers-gain-popularity.

[13] Id.

[14] Steven Sarabia, Arizona ESA program hits milestone as schools face closures, budget cuts, AZFAMILY, (Jan. 27, 2026), https://www.azfamily.com/2026/01/28/arizona-esa-program-hits-milestone-schools-face-closures-budget-cuts/.

[15] Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law, CONGRESS.GOV, https://www.congress.gov/crs-product/R48724 (last visited March 27, 2026).

[16] Id.

[17] S.B. 318, 2026 Gen. Assemb., Reg. Sess. (Fla. 2026).

[18] Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law, CONGRESS.GOV, https://www.congress.gov/crs-product/R48724 (last visited March 27, 2026).

[19] Amanda, Litvinov, The Price We Pay for Vouchers, NEA TODAY (Aug. 2025), https://www.nea.org/nea-today/all-news-articles/price-we-pay-vouchers#:~:text=The%20Voucher%20Wrecking%20Ball,the%20schools%20in%20our%20district.%E2%80%9D.

[20] Bob Reddy, Catholic Schools Week 2023 – Shining a light on Catholic Education, DIOCESE OF VENICE (Jan. 26, 2023), https://dioceseofvenice.org/catholic-schools-week-2023-shining-a-light-on-catholic-education/#:~:text=The%2015%20Diocesan%20Catholic%20Schools,org/our%2Dbishop/; Bob Reddy, Catholic school enrollment numbers reaches new record, DIOCESE OF VENICE (Sept. 5, 2025), https://dioceseofvenice.org/catholic-school-enrollment-numbers-reaches-new-record/; K-12 SCHOLARSHIP PROGRAMS: FAMILY EMPOWERMENT SCHOLARSHIP, FL DEPT. OF EDUC., https://www.fldoe.org/schools/school-choice/k-12-scholarship-programs/fes/ (last visited March 27, 2026).

[21] Federal Tax Credit Scholarship Program Included in P.L. 119-21, the FY2025 Reconciliation Law, CONGRESS.GOV, https://www.congress.gov/crs-product/R48724 (last visited March 27, 2026).

[22] See Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125 (2011); Zelman v. Simmons-Harris, 536 U.S. 639 (2002).

[23] See Jon Bradford Stanley, School Voucher Success May No Longer Depend on Federal Constitutionality, but Rather State Constitutionality, 25 Ohio N.U. L. Rev. 615, 615 (1999).

[24] Here Are 10 Reasons School Choice Is Winning, THE HERITAGE FOUND. (Jan. 24, 2019), https://www.heritage.org/education/commentary/here-are-10-reasons-school-choice-winning.

[25] Id.

[26] Litvinov, supra note 19.