The News: The U.S. Department of the Treasury and IRS yesterday released proposed regulations governing the Federal Scholarship Tax Credit, which launches January 1, 2027. The rules confirm that the program can benefit students in public schools as well as private schools. Thirty states have already opted in. Wisconsin has not.
The Wisconsin Institute for Law & Liberty (WILL) is again calling on Governor Tony Evers to opt Wisconsin into the program so Wisconsin families can participate.
The Quote: WILL Deputy Counsel Cory Brewer said, “Governor Evers has an opportunity to bring hundreds of millions of dollars in new educational support to Wisconsin families without spending a dime from the state budget. These regulations make clear that this is not simply a private school program. Eligible students, including those from public schools, can benefit from scholarships for tutoring, educational materials, special education services, transportation, technology, and more. Wisconsin cannot afford to sit on the sidelines while Wisconsin taxpayers are incentivized to direct their charitable dollars to scholarship granting organizations benefiting students in other states.”
Background on Program: The Federal Scholarship Tax Credit was enacted in 2025 and takes effect on January 1, 2027. Under the proposed regulations, individual taxpayers can claim a dollar-for-dollar federal tax credit of up to $1,700 for donations to scholarship granting organizations, which fund K-12 scholarships for eligible students from households at or below 300 percent of area median income. States must opt into the program for students in the state to benefit.
What the Proposed Regulations Mean for Wisconsin Families:
- Public and private school students can receive scholarships. Eligibility is not limited to students attending private schools.
- Scholarships can support educational expenses beyond tuition. Qualified expenses can include tutoring, special education services, books, supplies, computers, and other K–12 educational expenses.
- Married couples could receive up to $3,400 in federal tax credits. The proposed rules allow each spouse filing jointly to claim up to $1,700 for their own qualified contributions.
- Taxpayers could contribute through payroll deductions. The proposed rules expressly allow after-tax payroll deductions as a method of making qualified contributions to scholarship granting organizations.
- The rules make it easier to verify eligibility for some students. Students in certain low-income communities who receive tutoring or special education services, students in foster care, and students in households receiving certain means-tested benefits may qualify for streamlined income verification.
- States have limited authority to restrict participation. Participating states cannot impose additional requirements on scholarship granting organizations that are more restrictive than federal law or narrow the federal definition of qualified educational expenses.
What Wisconsin Could Leave on the Table: An analysis from the American Federation for Children (AFC) estimates that more than 2.3 million Wisconsin taxpayers could qualify for the federal tax credit. If just 10% participated, Wisconsin donors could generate approximately $363 million per year in scholarships for students in Wisconsin. At 20% participation, that figure would exceed $726 million annually. Another AFC analysis estimates that more than 875,000 Wisconsin students–or 91% of students statewide–would be eligible to receive scholarships.
If Wisconsin does not participate, Wisconsin students cannot receive scholarships through the program, even though Wisconsin taxpayers can still claim the tax credit by donating to scholarship granting organizations supporting students in other participating states.
Several Democratic-led states have also moved toward participating in the program. Colorado has opted in, while New York has announced that it is considering participation. Governor Evers has indicated that Wisconsin will not opt in.
