The U.S. Capitol Building
FAQs about the new Federal Tax Credit Scholarship Program
Q1. What is the new Federal Tax Credit Scholarship Program?
A1. The “One Big Beautiful Bill” was signed by the President on July 4, 2025. It creates a new federal tax credit designed to expand educational options for all school aged children by encouraging donations to nonprofits like AAA Scholarship Foundation (“AAA”) that grant scholarships to students for qualified elementary and secondary education expenses within the states they serve.
Q2. How is it funded?
A2. Individual taxpayers may donate up to $1,700 per year to nonprofit Scholarship Granting Organizations (SGOs) like AAA and receive a dollar-for-dollar federal tax credit to apply against their federal tax liability for that calendar year.
Q3. Is a dollar-for-dollar tax credit donation to AAA the same as a charitable tax deduction donation to another organization?
A3. No, they are very different. Donors will owe one dollar less in federal income taxes for every tax credit dollar they donate to AAA. By comparison, donors will only get a small decrease in their federal income taxes if they donate that same dollar for a charitable tax deduction since that amount is based on their marginal tax rate.
Q4. How will SGOs use the donated funds?
A4. As an SGO, AAA will use the funds to provide scholarships to eligible k-12 students which can be used for tuition, transportation, school supplies, and other educational expenses in connection with enrollment or attendance at an eligible elementary or secondary school. Eligible students are those who are (1) members of a household with an income that is not greater than 300% of the area median gross income and (2) eligible to enroll in a public elementary or secondary school.
Q5. How does a student qualify for a federal tax credit scholarship?
A5. Families living in opt-in states will apply with AAA for scholarships for their students (up to grade 12). In order to prove their eligibility, households must complete AAA Scholarship Foundation’s application process and provide supporting documentation by the stated deadline. To receive an AAA scholarship, the households must meet both the federal and AAA’s requirements.
Q6. When does it start?
A6. The program begins on January 1, 2027.
Q7. When can I apply for a federal tax credit scholarship for my child?
A7. Please bookmark this page and check back often for more details about the federal tax scholarship program.
Q8. Does AAA have any scholarship we can apply for now?
A8. Click this link to find out more about the scholarships available now!
Click here to learn more about high quality SGOs >>>>
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