Treasury Releases Federal Scholarship Tax Credit Rules: What Homeschool and Microschool Families Need to Know

What did Treasury release on October 1, 2026?

The U.S. Treasury Department and the IRS released two sets of rules for the new Federal Scholarship Tax Credit (Internal Revenue Code §25F), which Treasury calls the Education Freedom Tax Credit. The first is temporary regulations (TD 10057, RIN 1545-BS17), which set up how states opt in and certify scholarship granting organizations (SGOs). The second is proposed regulations (REG-117199-25, RIN 1545-BR97), which cover donor credits, student eligibility, SGO rules, reporting and audits. The credit starts January 1, 2027.

Treasury announced the package in an October 1 press release and a Treasury–Education Department fact sheet, after a press call with reporters the afternoon before. Both documents were on public inspection at the Federal Register on October 1 and published in the October 2, 2026 Federal Register (temporary regulations, 91 FR 62655, document 2026-20264; proposed rule / notice, 91 FR 62818, document 2026-20277). Comments on the proposed rule are due December 1, 2026; a public hearing is set for Tuesday, December 15, 2026, at 10 a.m. ET.

Treasury says taxpayers, states and SGOs may rely on the proposed rules for contributions made starting January 1, 2027, before final rules are issued.

What are the key numbers?

Treasury and the IRS estimate that by 2030 the program could draw nearly $26 billion a year from more than 11 million donors, flowing through 600 to 700 SGOs and funding as many as 2.2 million scholarships a year. Treasury's press release estimates that about 96% of children in participating states would meet the income test (the proposed rule text uses approximately 95%).

The scholarship figure depends on award size. The fact sheet and proposed rule describe the same $26 billion as enough for about 2 million full-time scholarships of $12,000 each, or about 5 million part-time scholarships of $4,500 each. These are federal projections, not guaranteed funding. Actual awards depend on how many states take part, how much donors give, and how each SGO sets its awards.

The temporary and proposed rules came out together. Comments on the proposed rules are due December 1, 2026 (60 days after Federal Register publication on October 2), and the IRS has scheduled a public hearing for Tuesday, December 15, 2026, at 10 a.m. ET.

How does the federal scholarship tax credit work?

A donor gives cash to a qualifying SGO and gets a dollar-for-dollar federal income tax credit of up to $1,700. The SGO then awards scholarships to eligible K-12 students for qualified education expenses. Students can only receive these scholarships if their state has opted in, but donors can give to an SGO in any participating state, no matter where they live.

• Donors: The credit is nonrefundable. Unused credit can carry forward up to five years. Any state tax credit claimed for the same gift reduces the federal credit. Donors cannot earmark gifts for a particular student.
• SGOs: An SGO must be a 501(c)(3) public charity on a participating state's SGO list. It must keep these contributions in separate accounts, spend at least 90% of its income on scholarships, and serve at least 10 students who do not all attend the same school. The rules add annual audits and a process for removing SGOs that don't comply.
• States: Under the proposed rules, participating states cannot add SGO operating rules stricter than federal law, including limits on the type of school students attend or the types of qualified expenses scholarships can fund. Treasury officials told reporters that states must list any SGO that meets the federal requirements.
• Families: A student must be eligible to enroll in a public K-12 school and live in a household earning no more than 300% of the area's median gross income. The proposed rules streamline income verification for foster children, families in certain needs-based programs, and some students getting school-based tutoring or special-needs services in low-income areas. Meeting the criteria does not guarantee a scholarship. SGOs set award amounts.

Scholarships can cover tuition at private (including religious) schools, plus tutoring, special-education services, books, supplies, computers and some extended-day programs. Treasury says those expenses must be tied to a student's school enrollment or attendance. Our glossary entry on tax-credit scholarships explains how this model differs from an ESA or a voucher.

What does this mean for homeschool and microschool families?

For homeschool and microschool families, the key question is whether your learning setting counts as a "school" under your state's law. The proposed rules use the tax code's existing definition, "any school that provides elementary education or secondary education (kindergarten through grade 12), as determined under State law." Qualified expenses must be connected to enrollment or attendance at such a school.

So the same weekly microschool or homeschool setup could qualify in one state and not in another:

• Homeschool families: Stateline reports that the rules treat homeschools however each state's law defines and categorizes them. Some states treat a homeschool as a kind of private school. Others regulate it as a separate category. AP reports that Treasury officials listed homeschooling costs among possible uses, but the proposed rules base that on state law.
• Microschools and hybrids: A microschool registered as a private school under state law is in a different position from a learning pod, co-op or enrichment program serving registered homeschoolers. Ask each program how it is legally organized in your state.
• Still unsettled: In the proposed rule, Treasury and the IRS say they intend to issue guidance on qualified expenses and on what counts as a "school" "as soon as possible." EdChoice says Treasury plans more work on how the credit applies to homeschool and microschool students in states that don't recognize those settings as schools, with final rules for 2028 and later expected in 2027.

This federal credit is separate from your state's ESA, voucher or state tax-credit scholarship program, and each has its own rules. The proposed rules also let each SGO narrow its own focus, for example to certain subjects or to lower-income students.

What should families do now?

Check whether your state is participating. Ask any microschool you're considering how it is classified under state law. Then watch for your state's SGO list, due February 15, 2027. Don't count on a scholarship until an SGO actually awards one.

1. Check your state. The IRS participating-states list showed 30 states as of September 14, 2026, including Florida, Texas, Georgia, Tennessee, North Carolina and Utah. Governors have until January 1, 2027 to opt in for 2027.
2. Ask about legal status. If you use a microschool, hybrid or co-op, ask whether it is a registered private school, operates under a homeschool option, or is a supplemental program. Get the answer in writing.
3. Gather income records. Eligibility is based on prior-year household income compared with your area's median, adjusted for family size. Families in certain benefit programs may be able to qualify with proof of participation instead.
4. Watch for SGOs. States submit SGO lists by February 15, 2027, and the IRS will maintain its own SGO list. SGOs, not the IRS, take scholarship applications and decide award amounts.
5. If you plan to donate: Only gifts made on or after January 1, 2027 count. Check that the SGO is on the IRS list, keep its written acknowledgement, and remember you cannot direct your gift to your own child.
6. Comment if the rules affect you. The proposed rules (REG-117199-25, 91 FR 62818) are open for public comment through December 1, 2026 at Regulations.gov. Homeschool and microschool definitions are among the open questions.

If you are comparing programs in a participating state, start with our state hubs, for example Florida, Texas, Georgia, Tennessee, North Carolina and Utah. Then ask each school how it expects to work with SGOs. Our parent guide to microschools explains how microschools, co-ops and homeschooling differ.

What is still uncertain?

A lot remains open. This is a proposed rule plus temporary rules, not final regulations. More states may opt in before January 1. Treasury has not yet issued detailed guidance on qualified expenses or what counts as a "school." The program also faces bills in Congress both to expand it and to repeal it.

Press counts of participating states vary. Education Week's tracker counts 31 states that have opted in or plan to, while the official IRS list shows 30. This article uses the IRS figure. Supporters, including EdChoice, welcomed the rules. Critics, including disability-rights groups quoted by K-12 Dive, have urged states not to take part.

This article summarizes the Treasury release, the Federal Register temporary and proposed rules published October 2, 2026, and same-day reporting for families using microschool.directory. It is not tax or legal advice. Verify current rules with the IRS, your state, and any SGO before making financial decisions.

Sources: U.S. Treasury, Oct. 1, 2026; Treasury–ED fact sheet; Federal Register temporary regs, 91 FR 62655 (2026-20264) and proposed rule, 91 FR 62818 (2026-20277); IRS FSTC page; Education Week; AP via ABC News; K-12 Dive; Stateline; EdChoice; Bloomberg Law.

Where can I find a microschool near me?

Browse microschools by state or use the live map on microschool.directory. Shortlist two or three programs and ask each one how it is classified under your state's law and which state or federal scholarship programs it expects to accept. Listing and claiming a school is free for owners through the end of 2026.

Frequently asked questions

What is the Education Freedom Tax Credit?

It is Treasury's name for the Federal Scholarship Tax Credit in Internal Revenue Code section 25F, created by the 2025 tax law. Starting Jan. 1, 2027, individuals who give cash to a qualifying scholarship granting organization (SGO) can claim a dollar-for-dollar federal tax credit of up to $1,700, or up to $3,400 for married couples filing jointly under the proposed rules. SGOs use the money for K-12 scholarships.

Is the federal scholarship tax credit available in my state?

Students can only receive these scholarships in states that opt in. The IRS listed 30 participating states for 2027 as of Sept. 14, 2026, and states have until Jan. 1, 2027 to opt in for 2027. Donors can give to an SGO in any participating state, even if their own state has not opted in.

Can homeschoolers use federal scholarship tax credit funds?

It depends on your state. The proposed rules define a "school" as one that provides K-12 education as determined under state law, and qualified expenses must be tied to enrollment or attendance at a school. Reporting on the rules says homeschools will be treated according to each state's law. Treasury has said more guidance on expenses and schools is coming.

Can a microschool accept these scholarships?

Possibly, depending on how the microschool is legally organized in your state and what each SGO chooses to fund. A microschool registered as a private school is in a different position from a learning pod or enrichment program serving homeschoolers. Ask the school directly and confirm with participating SGOs once state lists are out (due Feb. 15, 2027).

When can families apply, and how much is a scholarship?

Families apply to SGOs, not the IRS. SGOs set award amounts based on their mission, available funds and a student's qualified expenses. Donations that count for the credit start Jan. 1, 2027, and states submit their SGO lists by Feb. 15, 2027. Meeting the income and residency criteria does not guarantee an award.