Tennesseans will soon have the chance to receive a new federal tax credit that will in turn help families pay for public and private K-12 school costs.
The Federal Scholarship Tax Credit, also known as the Education Freedom Tax Credit, will launch in January. The U.S. Department of Treasury and Internal Revenue Service released long-awaited temporary rules for the program on Oct. 1. U.S. Secretary of the Treasury Scott Bessent hailed it as "America's first nationwide school choice program" in a news release detailing the rules.
Here are the basics of how the new program works, according to a memo from education research and advocacy nonprofit Tennessee SCORE.
- Taxpayers can receive a dollar-for-dollar tax credit when they give money to nonprofits known as scholarship granting organizations.
- In turn, the organizations will set up scholarship programs and distribute the funds to qualifying K-12 students.
- The scholarships can be used for private and public school expenses like uniforms, tutoring, computers and tuition, among others.
The tax credit passed as part of President Donald Trump's sweeping One Big Beautiful Bill
Act in 2025 and gave states the option to join. Tennessee is one of 30 states that have opted in so far, according to an Oct. 7 news release from the Tennessee Department of Education.
Here's what Tennessee families and students need to know about the rules, the program and what's next.
When does the Education Freedom Tax Credit launch in Tennessee?
The tax credit program opens on Jan. 1, 2027. Once the state releases a list of scholarship granting organizations, or SGOs for short, Tennesseans can contact them directly for details on how to participate in the tax credit.
Who can use the Education Freedom Tax Credit?
Anyone can make a contribution to eligible scholarship granting organizations in Tennessee. The federal government caps contributions to $1,700 per year for individual taxpayers and $3,400 for married couples who file taxes jointly.
How can I use my tax credit?
The tax credit will directly apply to the amount of federal income tax you owe.
For example, if you make a contribution to a qualifying scholarship granting organization in 2027, then the amount will be deducted from your federal income tax owed when you file taxes for that year. Most taxpayers will file their 2027 tax returns in early 2028. The credit could reduce your federal income tax to zero. If the credit exceeds the amount of federal income tax you owe, the remaining amount can roll forward for up to five years, according to the fact sheet.
Who can get the scholarships?
Students who are eligible to enroll in a public school that are from a household that does not exceed 300% of the area's median gross income qualify for the scholarships funded through the Education Freedom Tax Credit. The federal treasury department estimates that around 96% of children in participating states could be eligible for the funds, and that as many as 2.2 million scholarships could be funded by 2030.
Area gross median income is determined by the U.S. Department of Urban Housing and Development. The median for a family of four in Tennessee is $94,900 for 2026, according to the department's data. That number varies widely across areas in Tennessee, ranging from $132,900 to $348,300.
On the high end, that means a family of four with an income of roughly $1.05 million a year — which is 300% of $348,300 — could qualify for a scholarship from the organizations. On the low end, it tops out at $398,700, or 300% of $132,900.
How much are the scholarships worth?
The amount of the scholarships is up to the scholarship granting organizations. The awards are not allowed to exceed the qualified expenses they cover, the fact sheet stated.
How can the scholarships be used?
The scholarships can be used for qualifying K-12 expenses for public and private schools like tuition, tutoring, special education services, books, supplies and certain extended day care programs. The federal government is expected to release more detailed guidance on qualifying expenses as the tax credit launch date draws closer.
How much are Education Freedom Tax Credits worth?
An eligible taxpayer qualifies for up to a $1,700 tax credit per year, while married couples filing their taxes jointly can qualify for up to $3,400, according to the fact sheet.
Are Education Freedom Tax Credits the same as school vouchers?
While the tax credits have some similarities to school vouchers, they are not the same. In Tennessee, families have set deadlines to apply or reapply for school vouchers, which are then awarded directly to them.
Tax credits function differently. The money given to scholarship granting organizations will, in theory, increase the amount of scholarships available to Tennessee families who apply for them. It's up to the organizations to decide who gets a scholarship.
Donors are not allowed to earmark contributions for a specific student, the fact sheet said.
What is a scholarship granting organization?
Scholarship granting organizations are nonprofits that function as public charities that award scholarships to eligible K-12 students. They are required to spend 90% of their funds on scholarships, keep contributions in separate accounts and give scholarships to at least 10 students who attend different schools.
Tennessee and other participating states will list scholarship granting organizations on their official websites.
What TN leaders are saying about the Education Freedom Tax Credit
Tennessee Commissioner of Education Lizzette Reynolds, who has long advocated for school choice, said the new tax credit is "the first step of many" in the continued expansion of educational opportunities for Tennessee families.
"We look forward to building on this progress and giving more families the flexibility to meet the needs of diverse learning environments," Reynolds said in the department's release.
Gov. Bill Lee, who ushered in Tennessee's two school voucher programs, also voiced strong support for the program.
"A quality education can change the outcome of a child’s life, and that’s why Tennessee continuesto pursue every opportunity to allow parents to choose the learning environment that best fits theirchild’s unique needs," Lee said in the release. "I am grateful to President Trump and Secretary McMahon for their leadership to make school choice a reality for every family, and we’re proud to participate in the federal Education Freedom Tax Credit program."
What advocates, opponents say about the Education Freedom Tax Credit
Organizations like pro-school choice organization Americans for Progress have praised the tax credit, saying it is a way to empower parents to make the best educational choice for their children. Tori Venable, the organization's Tennessee director, called the tax credit a "huge win" for students, families and school choice.
"We are thrilled to see educational freedom expanded even further with the federal tax credit," Veneable said in an emailed statement on Oct. 6. "In Tennessee, we have fought hard to establish universal school choice. We are encouraged to see this administration following Tennessee’s lead and making sure every child in this nation gets a shot at the best education that works for them."
Opponents of the tax credit, like the nonprofit think tank Center for American Progress, have sharply criticized the move. In an article posted to the center's website, senior policy analyst for K-12 education Paige Shoemaker DeMio said the tax credit strips states of the power to oversee and hold scholarship granting organizations accountable, may disproportionately benefit wealthy families and lacks key protections against fraud and abuse.
"This tax credit ultimately works as a loophole for the federal government to subsidize private education using public taxpayer dollars, creating the first-ever national voucher program," she wrote.
Learn more
Learn more about the Education Freedom Tax Credit via this fact sheet from the U.S. Education Department.
The Tennessee Department of Education asks scholarship granting organizations that want to participate in the tax credit to fill out a preliminary interest form. Questions can be directed to SGO.Questions@tn.gov.
Rachel Wegner covers education and children's issues for The Tennessean. Got a story you think she should hear? Reach her via email at RAwegner@tennessean.com. You can also find her on X or Bluesky under the handle RachelAnnWegner.
This article originally appeared on Nashville Tennessean: What Tennessee families need to know about national school vouchers
