First State Opts in to Federal School Choice Tax Incentive

Several states with existing tax credits for school vouchers could decide based on the success of their own programs.

Supporters for school choice hold signs outside the U.S. Supreme Court in Washington on April 30, 2025. Alex Wong/Getty Images

Nebraska this week became the first state to officially opt into the federal scholarship tax program supporting private school vouchers, while governors across the nation are expected to announce their choice in the months ahead.

The program allows donors a dollar-for-dollar tax credit up to $1,700 to qualified scholarship-granting organizations or associated costs like transportation and supplies.

There are income eligibility guidelines in place to prioritize needy families.

The program, authorized by Congress under the One Big Beautiful Bill Act, takes effect in 2027.

States decide whether to opt in, but participation is not permanent, and future leaders can opt in or out.

Nebraska Gov. Jim Pillen signed an executive order to opt in on Sept. 29, calling it a game-changer for school choice.

“When it comes to educating our kids, we need to ensure that every student is in an environment that allows them to succeed,” Pillen said in a statement.

The American Federation for Children, which advocates for school choice and monitors related policy and legislative activity, indicated that Tennessee is expected to opt in soon, while leaders in Wisconsin, Oregon, and New Mexico proclaim staunch opposition.

The organization last month released a survey report that said 73 percent of voters believe that school choice should be available to all families.

North Carolina state lawmakers passed a resolution to opt in, which was vetoed by Gov. Josh Stein.

Congress members from the Tarheel State are pressing their state-level counterparts to override the veto.

“The quality of a child’s education should not be determined by their zip code, and North Carolina taxpayers deserve to be able to freely donate to scholarship-granting organizations in our state,” Rep. Greg Murphy (R-N.C.) said in a statement.

Virginia’s Gov. Glenn Youngkin, during a Sept. 10 American Enterprise Institute event in Washington, said that he plans to opt in to the program soon and will lobby future lawmakers to keep the program going.

Several states, including Arizona, Florida, and Ohio, have similar incentives for funding private school vouchers, where donors get state tax credits, according to the National Conference of State Legislatures.

There are no provisions in the new federal program preventing states from participating in both.

In Nebraska, the state chapter of the National Education Association Teachers union criticized Pillen’s decision to opt in, noting that in a November referendum, voters rejected a proposed taxpayer-funded school voucher program in their state last year.

“Nine in 10 Nebraska students attend public schools,” the union said in a release on its website. “Tax dollars should strengthen schools that serve all children, not fund private institutions.”

Pillen, in his statement, said the teachers’ union in 2023 pushed state lawmakers to repeal a tax-credit program for school vouchers.

“The teachers’ union has tried at every turn to thwart the efforts of our lawmakers to deliver any measurable support for school choice at the state level. And ultimately, that cost has come at the expense of our most vulnerable students,” he said.

Brian Jodice, American Federation for Children national press secretary, said it doesn’t make sense for governors or legislatures to opt out because, as a national program, donors can still contribute to programs in other states.

“You’re blocking the potential to create free educational resources in your state,” he told The Epoch Times. “Why not keep it in your state?”

Leslie Hiner, vice president of legal policy for the EdChoice organization, said a lot of work on this program remains between now and January 2027, even though this measure really just comes down to another individual federal tax credit.

The Department of the Treasury and Internal Revenue Service will establish rules for contributions and approved scholarship-granting organizations.

State lawmakers, meanwhile, might wait for their next election results and weigh the political risks of supporting it, Hiner told The Epoch Times.

“It will become a campaign issue,” Hiner said, adding that states that already have similar tax credits related to school choice shouldn’t hesitate to opt in if their programs are successful.

“This is just kind of a no-brainer. Why not bring the federal component in with something they already know works very well?”