Treasury and the IRS say about 96 percent of children in participating states would be eligible to receive scholarship money funded by a new federal tax credit. The estimate comes from an Oct. 1 announcement, IR-2026-117, which also set out how the credit works: up to $1,700 for an individual, up to $3,400 for a married couple filing jointly, and nonrefundable. The credit launches Jan. 1, 2027.

What the 96 percent covers

The figure is narrower than it sounds. Treasury’s release says the agencies estimate that “under the proposed rules and safe harbors, approximately 96 percent of children in participating states would be eligible to receive section 25F scholarship funds.” It describes children in states that have joined the program, not children nationwide, and it is an estimate built on rules that are still proposed.

Treasury Secretary Scott Bessent put the number of participating states at 30. “Thirty states have already opted in, and we encourage all 50 states to participate so every American student and family can benefit,” he said. The count can grow. The temporary regulations (TD 10057) let a governor submit an advance election on or before Jan. 1, 2027, and then file the state’s list of scholarship groups by Feb. 15, 2027. An election covers one calendar year and cannot be revoked once completed.

For a family, then, the first question is whether the child’s state is on the list, and the second is whether the household fits the income limit. Treasury’s release does not give dollar thresholds. It says the proposed rules explain how to apply the statutory household-income limit and generally disregard non-cash items such as the imputed return on home equity. It also describes streamlined eligibility for children in certain needs-based programs, foster children, and certain students receiving tutoring or special-needs services in low-income areas.

States have until Jan. 1 to lock in an advance election and until Feb. 15 to file their scholarship-group lists, so the 30-state count could change before the credit starts.

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How the donor side works

The scholarships are paid for by donors, not by the government directly. A taxpayer gives cash to a scholarship-granting organization, and the credit reduces the tax owed. Because it is nonrefundable, it cannot push a tax bill below zero. The IRS release says unused credit can be carried forward for up to five years, so a donor whose bill is smaller than the gift does not lose the rest right away.

Section 25F applies to taxable years ending after Dec. 31, 2026, and taxpayers, states and scholarship groups may rely on the proposed regulations for qualified contributions beginning Jan. 1, 2027. The companion temporary regulations take effect Dec. 1, 2026 and expire Oct. 1, 2029. Under the temporary rules, scholarship groups must give donors an acknowledgment by Jan. 31 and report contribution data to the IRS by Feb. 28.

A scholarship-granting organization generally has to be a section 501(c)(3) public charity, keep qualified contributions in a separate account and appear on its state’s list. The proposed rules use unique donor numbers, so the groups do not need donors’ Social Security numbers.

The size Treasury projects

Treasury and the IRS also proposed a safe harbor for multistate groups whose activities are at least 85 percent scholarship-granting. They estimate it could add about 450 organizations and raise qualified contributions by up to $3 billion a year. By 2030, the agencies estimate 600 to 700 scholarship groups, more than 11 million taxpayers, nearly $26 billion in qualified contributions a year and up to 2.2 million scholarships a year. Those are projections, not results.

Education Secretary Linda McMahon called it “the largest expansion of school choice in history,” adding that it “will supercharge those opportunities for millions of children.”

Checking a child’s state and the scholarship list

The free starting point is the IRS announcement, IR-2026-117, and the Treasury release linked above. Neither names a scholarship group a family can apply to. That list comes from each participating state, which has to file it with the IRS by Feb. 15, 2027, so a family needs to ask the state’s education agency or governor’s office whether the state has opted in and when its list will be public.

Households should gather the number of children, the state of residence and last year’s total household income, since the income limit is part of eligibility. Donors should work out whether their tax bill is large enough to use the full $1,700 or $3,400 in one year, because the credit is nonrefundable and the carryforward lasts five years.

The dates that matter run in order: Dec. 1 for the temporary regulations, Jan. 1 for the credit and the states’ advance election deadline, and Feb. 15 for state lists. The 96 percent estimate is Treasury’s own, and the proposed rules behind it can still change.

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This article was produced with AI assistance and edited for accuracy against the sources linked above.