What the guidance says and how the program works
Treasury's new instructions lay out the obligations for states, nonprofits and individual filers. Beginning in January, individuals can allocate as much as $1,700 of what they owe in federal taxes to eligible nonprofits that award scholarships for qualified education expenses.
Treasury and the IRS expect the program to draw nearly $26 billion annually by 2030 and support more than 2 million scholarships. Treasury Secretary Scott Bessent called it "America's first nationwide school choice program," adding, "Thirty states have already opted in, and we encourage all 50 states to participate so every American student and family can benefit."
Where the politics stand
Governors choose whether their state participates, and the split has mostly tracked party lines since last year's federal tax credit law. Republican governors largely support the initiative, whereas Democrats and labor unions usually contend it undermines already strained public schools.
In Kentucky and Kansas, Republican-controlled legislatures overturned vetoes from their Democratic governors to opt in. In his veto message, Kansas Governor Andy Beshear wrote, "Kentuckians have been firm that public dollars should only be used for public education," citing a 2024 vote that rejected public funding for private or charter schools. "The message was clear. Don't divert public dollars. Fund our public schools."
Advocates note public school students also qualify for scholarships and have pressed Democratic governors to participate so their states do not leave potential aid unused. In New York, Governor Kathy Hochul had planned to join pending a review of Treasury's rules, while watching for "poison pills that could harm New York's education system," Deputy Press Secretary Emma Wallner said in May. Her office did not immediately respond to requests for comment.
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Who is gearing up to deploy the money
Nonprofits and schools have been building capacity ahead of the launch. ACE Scholarships, a Colorado-based group operating since 2000, has expanded to run the federal program in every state. This year it is allocating $25 million for marketing and awareness, has also put about $12 million into its technology platform, and counts partnerships with roughly 2,000, mostly private, schools along with over 400 agreements involving religious organizations and charter school networks. The plan after launch is to reach 4,000 partner schools. ACE President Jason DiFraia said the group will be "a one-stop shop to take donations, to allow parents to apply for a scholarship, to award that kid a scholarship, and for that kid to pay for their tuition or fees or qualifying expenses through our platform."
In Colorado, Governor Jared Polis stands as the first, and to date the only, Democratic governor to opt in, and public school foundations there are preparing as well. The Denver Public Schools Foundation is creating a scholarship fund to route dollars raised through the new credit. Eighteen public school foundations, Denver's among them, are also building a statewide fund to support public school students. Scholarships could cover tutoring or test prep, extracurricular fees such as a musical instrument or field trips, and other needs like transportation or mental health services, said DPS Foundation President and CEO Sara Hazel. "What we're seeing is the needs of our students and families increasing every year, and so the importance of a new funding stream and an opportunity was just really too important and I believe worth the effort of us leaning into this."
How public schools are faring and what it could mean for your money
Public school districts are under financial strain from enrollment declines, higher costs and growing competition from alternative models. According to S&P Global Ratings, half of districts posted operating deficits in 2025, an increase from one-third in 2024.
With the program launching in January, and up to $1,700 per filer moving through approved nonprofits, dollars will flow where states participate and where local organizations are ready to accept and distribute funds. That mix now includes private and religious school networks that have positioned themselves to scale, as well as public school foundations creating new scholarship pipelines. For families, the opening question is simple: does your state opt in, and if so, which local groups will be channeling the money?
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