Nearly 1.7 million students in North Carolina could soon access private school scholarships. This is due to a new federal tax credit program. The program allows individuals to donate to scholarship organizations. They can then claim a federal tax credit for these donations.
Federal Tax Credit Program Explained
The federal program is called the Education Freedom Tax Credit (EFTC). It was established under the One Big Beautiful Bill Act. This act was signed into law in July 2025. The EFTC extends tax provisions from the 2017 Tax Cuts and Jobs Act.
Starting January 1, 2027 , individuals can receive a 100% federal tax credit. This credit is for donations made to scholarship-granting organizations (SGOs). The maximum credit is $1,700 per year .
North Carolina's Eligibility
An analysis by the American Federation for Children (AFC) shows broad eligibility. In North Carolina, 93% of K-12 students could qualify for scholarships. This rate is one percentage point above the national average.
North Carolina officially opted into the program in June. This followed changes to House Bill 87. Governor Josh Stein had previously raised objections.
Who Qualifies for Scholarships?
To qualify for a scholarship, a student must be eligible for public school enrollment. Their household income must not exceed 300% of the area's median gross income . This is determined by the U.S. Department of Housing and Urban Development.
Scholarships can cover costs like private school tuition. They can also pay for tutoring and dual-enrollment programs.
National Scope of the Program
Nationwide, the EFTC makes an estimated 51.7 million children eligible for scholarships. North Carolina is among 22 states that consider homeschooled students as private or religious school students. However, the U.S. Treasury Department may issue final rules. These rules could affect eligibility criteria.
Among the 10 most populous states, Texas, Florida, New York, Ohio, Georgia, and North Carolina have opted into the program. California, Illinois, Pennsylvania, and Michigan have not.
Timeline for the Program
Eligible donations will qualify for the federal tax credit beginning January 1, 2027 . Individuals can claim this credit on their federal taxes starting in 2027.
