Many American schoolchildren will benefit from sizable scholarships once a federal tax credit of up to $1,700 kicks in next year for donors. Wisconsin children, as it stands right now, will not be eligible.
Here’s what Wisconsinites need to know about how the program works, why Wisconsin’s current governor has not opted in, and whether that might change under a new governor.
What is it?
Starting in 2027, federal taxpayers will be able to take a dollar-for-dollar credit against their tax liability for donations they make toward “scholarship granting organizations” that help children with K-12 school costs.
In essence, the tax credit lets individual taxpayers use some of the money they’d otherwise give to the federal government to instead help children with a wide variety of education-related costs.
Is this new?
It’s new at the federal level, enacted as part of the big budget reconciliation in 2025. Eighteen states, including Iowa and Indiana, have similar tax credits for education donors at the state level. Wisconsin does not.
Who can donate?
Anyone with a federal tax liability may claim the credit for charitable contributions to a scholarship granting organization that, in turn, will fund scholarships for eligible students in that organization’s state.
Can Wisconsinites get the tax credit?
Yes. Wisconsinites can claim the credit for their donations starting in 2027. But they can direct the money only to SGOs in other states that provide scholarships for children in those states. There are 31 of those as of early June.
Can Wisconsin children benefit?
No, not as it now stands. Gov. Tony Evers will not allow donations to Wisconsin SGOs to be used to fund scholarships for Wisconsin children. They will not be able to receive scholarships unless and until a Wisconsin governor opts in.
So the way it currently stands, a Wisconsin taxpayer could donate to a scholarship granting organization that helps kids in Indiana, for instance, but not to any SGO helping kids in Wisconsin?
Correct.
How much can a taxpayer donate?
The credit for any taxpayer equals his or her donations, up to $1,700. It’s not “refundable,” so it can’t push your tax liability below zero.
It doesn’t appear, say observers, that the credit’s maximum is doubled for married couples filing jointly. But that won’t be certain until the Department of the Treasury finishes drafting the regulations governing the program sometimes later this summer.
So it’s like a charitable deduction?
No, it’s much more powerful. A deduction lowers the amount of your taxable income. This, a tax credit of as much as $1,700, lowers the actual federal tax you owe by a dollar for every dollar you donate. In other words, your out-of-pocket costs will be the same. You would just direct some money to an SGO of your choice rather than to the federal government.
How much in donations will this produce?
Unclear, since it depends on how many taxpayers choose to donate. Congress’ tax scorekeeper estimated in May that donations would come to $2.6 billion nationwide in 2028, rising to $4.4 billion by 2034. For comparison, that latter figure is about what the U.S. Department of Education spent last year on vocational rehabilitation grants to states.
What about in Wisconsin?
While Wisconsinites will, as it now stands, be able to donate to SGOs in other states, common sense says they would be more inclined to give to SGOs helping kids in the Badger State. Were that allowed, donations by Wisconsinites could annually be $15 million if 1 percent of eligible taxpayers took advantage of the credit, or $452 million if 30 percent of them did, according to a 2025 estimate from Democrats for Education Reform.
Who can the money go to?
Donations must be to a scholarship granting organization approved by a participating state. An SGO is set up by a tax-exempt nonprofit organization — a “501(c)3,” under federal law. It must spend at least 90 percent of donations on scholarships, and it must serve 10 or more students and more than one school.
There’s an income limit on scholarship recipients’ families: They must earn no more than 300 percent of their area’s median income. That cap is generous — above $300,000 in many Wisconsin counties — so most children would qualify.
There are other known requirements in the law. The Treasury regulations being drafted likely will include still more details.
Can donations go to a private school?
Scholarship granting organizations give aid to particular students to help with some specified educational expenses. The money doesn’t go to schools; it follows children. It can follow children to private schools.
Can donations go to a child at a public charter school?
As long as the expenses are “qualified,” those expenses can be for students at a charter school, too.
Can donations go to a child at a traditional public school?
Yes, scholarships can help children at traditional district-run public schools, too.
The list of qualified expenses includes tutoring, special needs services, uniforms such as for a marching band, equipment, or extra fees, such as for AP exams. District superintendents in Wisconsin cited career exploration programs or co-curricular opportunities, such as a robotics team. Some districts in Wisconsin already benefit by donations to “community foundations” that support such needs.
The determination of where dollars end up lies with the scholarship granting organizations — which can center on supporting a particular sort of school or children interested in a specific subject or activity — and with taxpayers who choose to direct donations to a particular SGO.
Does it take money away from public schools?
No. The money going to scholarships wasn’t already earmarked for federal education aid, and the tax credit isn’t offset by any kind of reduction in existing aid to schools. What donors give is an entirely new stream of money for students, and, as the New York Times has concluded, “The program does not reduce existing school funding.”
Aren’t these just vouchers?
No. That word usually means money specifically to cover tuition at a private school. SGOs are free to offer scholarships for many more purposes, including expenses incurred by kids at tuition-free public schools. The design lets families bundle together educational services from different sources, custom-fit to their children’s needs.
Didn’t Evers say it would be “catastrophic” for public schools?
Yes, he did say that when he rejected any Wisconsin opt-in to the scholarships last fall.
Why does he oppose it?
The governor, an opponent of Wisconsin’s school choice program, vetoed a bill this spring that would have included Wisconsin in the scholarship program because he believes it is an “expansion of a private voucher school program.”
He views the tax credit as “public funds” and his veto message said “public funds should go to public schools. Period.”
Will students in public schools benefit?
Yes. Children in public schools are eligible for scholarships, and some public school leaders, splitting from the governor, have already come out in support of Wisconsin opting in because they think it will help their students and their schools.
What can it help fund?
Any “qualified” educational expenses, which means the same as a list already set up in federal law for education savings accounts. This includes:
- Tuition and enrollment fees at eligible private schools, at microschools, at learning pods or at hybrid programs.
- Tutoring — one-on-one, extra reading help, subject-specific classes.
- Curriculum and instructional material — textbooks, workbooks or software, including for homeschooling.
- Specialized learning for students with disabilities, including things not offered by a school district.
- Other qualified expenses, so long as they fit into the regulations being drafted and into the rules set by an SGO providing the scholarship.
Who decides whether to opt in?
The law says it’s up to a state’s governor or “such other individual, agency, or entity” designated by state law. In practice, most opt-ins have been by governors, but in Kansas and Kentucky, lawmakers ordered the state to opt in and overrode a governor’s veto. North Carolina’s Legislature just did the same.
Is there a deadline to opt in?
Evers can do that still before the end of 2026 by sending the Treasury a list of SGOs permitted to work in Wisconsin.
Can a subsequent governor opt in?
Yes. A governor can opt in for years after 2027 by sending the Treasury an SGO list by the end of the prior year. It’s not clear whether a later governor can opt back out.
What have would-be Wisconsin governors said?
Tom Tiffany, the presumptive Republican nominee, said he would opt in, and so did one Democratic candidate, Missy Hughes. Other Democrats running for governor have hedged, at least not ruling out participation during question-and-answer sessions with a non-partisan business group.
Have other governors in other states opted in?
Most of the 31 states that have so far opted in did so by their governors’ say-so. Most of those governors have been Republicans, but Colorado’s Jared Polis, a Democrat, was an early yes, and in May New York Democrat Kathy Hochul also opted in. North Carolina’s Josh Stein, a Democrat, had said he was waiting until regulations are drafted, but the Legislature overrode his veto, opting the state in.
Support for opting in is bipartisan: A group favoring school choice, Democrats for Education Reform, said in March that its polling found Wisconsinites favored Evers opting into the program by a 59 percent to 29 percent margin, with support even strong among self-identified Democrats. Earlier polling similarly shows broad approval.
Are there any scholarship granting organizations in Wisconsin yet?
No. Wisconsin has no state-level version of the tax credit, so until a Wisconsin governor starts taking names to submit to the Treasury, nonprofits can’t sign up.
However, the non-partisan Metropolitan Milwaukee Association of Commerce, a nonprofit, has a structure set up to become an SGO once a governor opts in. The head of the association said the group is working with accounting professional associations to familiarize employers, who could help employees claim the credit via payroll deduction, and he said he’s talked with other nonprofits that are preparing to set up SGOs once permitted.
Who can set one up?
Any nonprofit that qualifies for 501(c)3 status under federal law. They cannot be set up by private foundations.
Can’t parents just get a tax credit for their own kids?
No. Donors may pick any SGO as they see fit, but they cannot earmark their donation for a specific child — so parents specifically cannot claim a tax credit for tuition they paid. The SGO is also subject to other restrictions already in law to protect against “self-dealing.”
What’s the actual name?
The program is called by several names so far. Congress called the legislation enacting it the Educational Choice for Children Act, a name it bore as stand-alone legislation introduced previously. The departments of Education and Treasury call the resulting program the Education Freedom Tax Credit. The IRS, which will administer it and is writing the regulations governing it, calls it the Federal Scholarship Tax Credit.
All three names refer to the same thing.
Patrick McIlheran is executive editor at the Badger Institute.
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