Everything you should keep in mind before applying for the
Federal Tax Credit Scholarship.
Overview of Federal Tax Credit Scholarship
Summary of the Bill
The Educational Choice for Children Act (ECCA) creates a new federal tax credit to boost donations for K-12 scholarships. By giving to nonprofits that fund these awards, donors help students cover the rising costs of tuition and other school-related needs.
The main provisions and scope of the bill are as follows:
Significant Importance
Taxpayers
The bill essentially creates an incentive for contributions to SGOs like the Children’s Tuition Fund by providing tax credits for those contributions. This allows taxpayers to support educational choice while potentially reducing their tax burden.
Schools
By providing students with greater access to tuition funding, the tax credit scholarship could increase enrollment for schools, especially private and charter institutions. It also encourages more competition among schools, and potentially leads to better educational outcomes.
Students and Parents
ECCA seeks to increase access to alternative educational options. In essence, families will be able to choose the best educational arrangement for their children, whether it be a private school or a specialized learning environment, ultimately offering more flexibility in how education is delivered.
Tax Credit for Contributions
Individuals can claim a nonrefundable federal income tax credit of up to $1,700 in contributions to an approved Scholarship-Granting Organization.
Eligibility Criteria for Scholarships
Scholarships are reserved for students from households with incomes up to 300% of the area median gross income see HUD website. Priority is given to students previously awarded scholarships and their siblings.
Qualified Expenses
Funds can be used for tuition at private or religious schools, curriculum materials, standardized test fees, educational therapies for students with disabilities, and even homeschool-related costs.
Oversight and Accountability
Scholarship-granting organizations must meet strict requirements, including independent audits, income verification of recipients, and compliance with anti-fraud measures.
Leveraging tax incentives to promote educational opportunities outside of the public school system. It should also be emphasized that the tax credit scholarship serves as a mechanism to fund education for median families.
The Educational Choice for Children Act of 2025 is recognized as the first nationwide school choice bill that passed the U.S. House Committee on Ways and Means. It won the committee’s favor on September 11, with a vote of 23-16.
Eligibility for Scholarships
Income Thresholds and Criteria
Eligible students or those qualified for the scholarships must:
- Belong to a family with a median income level for their area not exceeding 300% of the area median gross income,
based on the guidelines under Section 42; and - Be eligible to enroll in a public elementary or secondary school
For example: if the typical median income for your area is $50,000, families earning $150,000 or less may qualify.
Calculate Eligibility
- Click Here: HUD Income Limits
- Select your State and then your County and click “View County Calculations”
- Take amount listed under the section Median Family Income and multiply by 300%
Coverage for Educational Expenses
Below are the salient points regarding what is considered as “qualified elementary or secondary education expense” under the bill.
- Tuition for both public and private schools
- Fees associated with nationally standardized tests, Advanced Placement exams, and college or university entrance exams
- The cost of curricular materials, instructional materials such as books, and online educational content
- Costs for dual enrollment programs at higher education institutions
- Educational therapies for students with disabilities, provided by licensed or accredited professionals
- Expenses related to assistive technologies and other necessary accommodations
Requirements for Ensuring
Eligibility of Contributions
Qualifications to Operate
To qualify for participation in the tax credit, an organization must be a registered 501(c)(3) nonprofit, ensuring it is tax-exempt and not classified as a private foundation.
It is also required to serve students from at least two schools, ensuring its services reach a broad range of students and promoting diversity and accessibility within the scholarship program.
Operational and Financial Guidelines
Scholarship Granting Organizations must undergo annual audits by an independent certified public accountant to ensure financial integrity and compliance with applicable regulations.
The organization must also adhere to both federal and state laws regarding its operations, ensuring that all scholarships are allocated properly and legally.
Furthermore, qualified organizations must maintain clear records to ensure transparency and to demonstrate that the funds are used exclusively for qualifying educational expenses.