Tax credit scholarships are school choice programs where individuals or businesses receive tax credits for donating to scholarship organizations, which then award funds to eligible students for educational expenses including private school tuition and sometimes homeschool costs.
What is a Tax Credit Scholarship?
Tax credit scholarships create a public-private partnership for educational funding. Donors—individuals or businesses—contribute to approved Scholarship Granting Organizations (SGOs) and receive dollar-for-dollar state tax credits in return. The SGOs distribute these donations as scholarships to qualifying families. Unlike vouchers or ESAs that use government budget allocations directly, tax credit scholarships route private dollars through nonprofit intermediaries. This structure appeals to states hesitant about direct government funding of private education while still expanding school choice options.
Key Takeaways
- 18 states currently operate 22 tax credit scholarship programs
- Donors receive tax credits (not deductions) for contributing to scholarship organizations
- Funding depends on donation levels—not guaranteed like ESAs or vouchers
- Homeschool eligibility varies dramatically by state; most programs target private schools
- New federal tax credit scholarship launches in 2027 with up to $1,700 per donor
How Tax Credit Scholarships Work
States with Tax Credit Scholarship Programs
Currently, 18 states operate 22 tax credit scholarship programs: Alabama, Arizona (4 programs), Arkansas, Georgia, Indiana, Iowa, Kansas, Louisiana, Montana, Nevada, New Hampshire, Ohio, Oklahoma, Pennsylvania (2 programs), Rhode Island, South Carolina, South Dakota, and Virginia. Pennsylvania's program is the largest with over 54,000 enrolled students. Arizona pioneered the model in 1997 and now offers nearly universal eligibility. Program details—income limits, eligible expenses, scholarship amounts—vary significantly by state.
Tax Credit Scholarships vs. ESAs vs. Vouchers
Homeschool Eligibility
Most tax credit scholarship programs target private school tuition rather than homeschool expenses, but exceptions exist. Oklahoma offers up to $1,000 per homeschooled student for tutoring, textbooks, curriculum, and testing. Alabama provides up to $2,000 per child (capped at $4,000 per family). Florida's Personalized Education Plan covers instructional materials, curriculum, and testing fees for homeschoolers. New Hampshire and Louisiana also extend some tax credit benefits to home educators. Check your specific state's program—eligibility rules change as programs expand.
The Bottom Line
Tax credit scholarships represent a growing school choice mechanism that bypasses direct government funding concerns by incentivizing private donations. For homeschoolers, these programs are hit-or-miss—some states include homeschool expenses, many don't. The new federal tax credit scholarship launching in 2027 could significantly expand options depending on how states implement it. If you're in a state with an existing program, check whether homeschool expenses qualify. If not, ESAs or education tax deductions may serve your family better.
