The Education Freedom Tax Credit, Explained

On January 1, 2027, something new begins in American education. For the first time, ordinary taxpayers will be able to send part of their federal income tax to Christian education instead of to Washington. It is called the Education Freedom Tax Credit, and I believe it will be one of the most important developments for homeschool families in a generation.

Because it is new, there is a lot of confusion about it. So I want to explain where it came from, how it works, why it is not a government program, and what it means for homeschool families.

Where it started

The idea is not new. Arizona created the first state tax-credit scholarship in 1997. The concept was simple: let people give to a private scholarship charity and receive a credit against their state taxes. Over the next quarter century, about two dozen states adopted their own versions. They helped hundreds of thousands of children, and they proved the model works.

The obvious next step was to do the same thing with federal taxes. Senator Ted Cruz introduced a federal version in 2019, and it was refined over several sessions of Congress as the Educational Choice for Children Act. On July 4, 2025, it finally became law as part of the One Big Beautiful Bill Act. It now lives in Section 25F of the tax code, and it is permanent. It does not expire.

How it works

The mechanics are straightforward once you see them laid out:

1. You give. An individual gives up to $1,700 in cash to a Scholarship Granting Organization (an SGO). The Homeschool Fund at the Nehemiah Foundation is being built to be one.
2. You mark it. At the time you give, you designate the gift as a tax-credit gift. It goes into a separate account used only for scholarships.
3. You get a receipt. By January 31 of the next year, the SGO sends you an acknowledgment letter with a donor number.
4. You claim the credit. You file IRS Form 8525 with your federal return. Your federal tax goes down by the amount of your gift, dollar for dollar, up to $1,700.
5. A family receives a scholarship. The SGO awards scholarships to eligible students, who use them for real educational expenses.

A married couple filing jointly can claim up to $3,400 if each spouse makes their own gift. The credit can’t be more than the tax you owe, but any unused amount carries forward for up to five years. Gifts made on or after January 1, 2027 count. The calculator on our giving page shows what a gift would cost you.

There are a few guardrails. An SGO must be a 501(c)(3) public charity. It must spend at least 90 percent of its income on scholarships. It must serve at least ten students who don’t all attend the same school. And it can’t earmark a gift for a particular child. You can’t give $1,700 and direct it to your grandson. You give to the fund, and the fund awards scholarships by published rules.

Why this is not government involvement

This is the question I hear most from homeschool families, and it is the right question to ask. Many of us have spent decades keeping the government out of our children’s education. We are not interested in trading our freedom for a check.

So it is worth being precise about what this credit is and what it isn’t.

There is no federal appropriation. Congress doesn’t collect the money, put it in a federal education program, and hand it out with strings attached. The Department of Education doesn’t run it. No federal agency picks the students, approves the curriculum, or decides what your children learn.

Instead, here is what happens. A private citizen gives his own money to a private charity. That charity gives scholarships to private families. The tax code simply recognizes the gift by reducing what the donor owes. The money never passes through Washington at all.

Think of it as three hands. The donor’s hand gives to the foundation’s hand, and the foundation’s hand gives to the family’s hand. The government’s only role is to step out of the way and say, “We’ll take that much less from you this year.”

The Supreme Court has already recognized this distinction. In Arizona Christian School Tuition Organization v. Winn (2011), the Court looked at Arizona’s tax-credit scholarships and concluded that the money given to those charities was not government money. It came from the private choices of private taxpayers.

The state’s role is also limited. A state must opt in and provide the IRS a list of approved SGOs in that state. That’s it. The temporary rules Treasury issued in October 2026 actually prevent states from adding their own restrictions on the kinds of schools families choose.

Of course, we will watch this carefully. Any program connected to the tax code deserves vigilance. But the structure itself is about as far from a government program as a tax provision can be. It is individuals giving to a foundation, which in turn gives to individuals.

How it applies to homeschooling

Here is where homeschool families need to pay attention, because the details matter.

Almost any K–12 student can be an eligible student. The law requires two things: the student must be eligible to enroll in a public school (which nearly every child is), and the household income must be at or below 300 percent of the area median income. That is a high bar. In most of the country it covers families earning well into six figures, and Treasury estimates that more than nine in ten children in participating states fall under it.

The second question is what a scholarship can pay for. The law ties qualified expenses to an older section of the tax code (Section 530), which covers expenses connected to a student’s enrollment in a “public, private, or religious school,” with “school” defined by state law. Those expenses include:

• Tuition and fees
• Curriculum, books and supplies
• Academic tutoring
• Computers, internet access and educational software
• Services for students with special needs

That brings us to the key point for homeschoolers. Every state defines homeschooling in its own way. In some states, a home school is legally a private school. In others, home education has its own category in the law, or families have more than one legal path to choose from. Treasury has said that a home school will be treated as a school if it is treated as a school under state law, and it has promised more guidance on this point.

That is why the Homeschool Fund will support homeschooling as it is defined in each state where we serve. We won’t ask you to fit a single national mold. We’ll explain how the rules apply where you live and help you understand which path makes your family’s expenses eligible. As the final federal guidance arrives, we will update our families right away. You can see how we plan to apply these rules in our list of what Homeschool Fund scholarships will cover.

How big it will be

This is not a pilot program. There is no national cap on the total amount of credits. Any eligible taxpayer can participate, as long as he gives to an SGO in a state that has opted in.

As of October 2026, thirty states have opted in. Treasury’s own projections estimate that by 2030 the credit could direct nearly $26 billion a year into scholarships, fund as many as 2.2 million scholarships annually, and involve more than 11 million American taxpayers.

Those are projections, not promises. But even if the real numbers come in at a fraction of them, the credit will move billions of dollars a year out of the federal Treasury and into the hands of families. If even a modest share of that reaches homeschool families, it will be one of the largest private investments in home education this country has ever seen.

Where the Nehemiah Foundation fits

The Nehemiah Foundation has supported Christian education since 1986. Our founders were among the first homeschooling families and worked to make homeschooling legal. The Homeschool Fund is the natural next chapter of that work.

We are registering in as many of the thirty participating states as we can. You can read more about that plan on our Where We Serve page.

What you can do now

If you pay federal income tax, you can pre-register today, and we’ll remind you when giving opens on January 1. If you are a homeschool parent, you can join our interest list so you’ll be the first to know when applications open.

• Pre-register for 2027
• Read: How a tax credit works
• For families: who can apply and what we cover
• Read the FAQ