The federal scholarship tax credit and homeschool

How does the federal scholarship tax credit work?

The IRS calls it the Federal Scholarship Tax Credit. It is section 25F of the tax code. Donors, not families, get the credit: a person who gives cash to an approved scholarship granting organization (SGO) can claim a federal credit of up to $1,700 for the year, reduced by any state credit claimed for the same gift. The IRS says it is non-refundable and that married couples filing jointly may each claim $1,700, for $3,400 on the joint return. It applies to taxable years ending after 31 December 2026, so to gifts from 1 January 2027.

Families get scholarships from the SGO. The statute says an eligible student lives in a household with income of no more than 300 percent of the area median gross income and is eligible to enroll in a public elementary or secondary school. A scholarship pays "qualified elementary or secondary education expenses", which the statute defines as expenses described in section 530(b)(3)(A).

Which states are in?

A state takes part only if its governor elects to, and sends the IRS a list of approved SGOs by 1 January each year. The IRS's list, as of 22 October 2026, has 30 states. Other states can still join, so this list can change.

Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wyoming.

Peabody is not an SGO, never takes scholarship money and never asks for donations.

Can the scholarship pay for homeschool costs?

That is not settled. Neither the statute nor the proposed rules deal with homeschool directly. Here is what the rules say about the key word, "school":

• An expense counts only if it meets section 530(b)(3)(A), which depends on the student's enrollment or attendance at, or otherwise being in, a school.
• Section 530(b)(3)(B) defines "school" as any school that provides elementary or secondary education (kindergarten through grade 12), "as determined under State law". The proposed rules adopt that meaning.
• Treasury says it has received many comments asking for guidance on what counts as a qualified expense and a school, and intends to issue that guidance "as soon as possible".

So, our reading, which is not tax advice: where state law treats a homeschool as a school (a private school, for example), its costs may count; where a state has a separate homeschool law, it is less clear. Wait for Treasury's final word, and ask the SGO in your state what it will fund.

What are the dates?

Comments go to regulations.gov, docket REG-117199-25. We will update this page after the hearing.

What should a homeschool family do now?

• Look up your state on the list above, and your state education department's page on the program.
• Don't count on the money for a homeschool until your state's SGO says in writing that it funds homeschool costs.
• South Dakota's Department of Education says on its page that the state intends to support homeschool students too, with a list of organizations due in early 2027 (see its state page).
• Keep receipts and a record of what you teach; the portfolio builder helps.