The new federal Education Freedom Tax Credit program is moving closer to reality, and West Virginia families are now positioned to benefit.

The U.S. Department of the Treasury and the Internal Revenue Service recently released a preview of forthcoming guidance for the program, which is scheduled to launch on January 1, 2027. The IRS has also announced that 27 states have elected to participate in the federal scholarship tax credit program — and West Virginia is one of them.

That is a major development for families, Christian schools, private schools, homeschoolers, and scholarship organizations across the Mountain State.

Under the new federal law, individuals will be able to contribute up to $1,700 annually to approved Scholarship Granting Organizations and receive a dollar-for-dollar federal income tax credit for their contribution. This is important because a tax credit is not the same as a tax deduction. A deduction reduces taxable income. A credit directly reduces federal income tax liability. In practical terms, a taxpayer who gives $1,700 to an approved SGO could potentially receive a $1,700 federal tax credit, subject to the final rules and the taxpayer’s individual tax situation.

Those donated funds would then be used by approved scholarship organizations to provide scholarships and educational assistance to eligible students. Depending on final federal rules and state guidelines, scholarship funds may be used for a wide range of K–12 educational expenses, including private school tuition, tutoring, special-needs services, and other qualified educational costs.

West Virginia Has Elected to Participate

The most important news for our state is that West Virginia has elected to participate in the federal Education Freedom Tax Credit program.

Because participation is voluntary, each state must choose whether to opt in. Students can only benefit from the program if their state participates and approved SGOs are listed for that state. West Virginia’s decision to participate means families and scholarship organizations in the state can now begin preparing for the 2027 launch.

This does not mean every detail is finalized. Treasury and the IRS still need to issue proposed regulations, and West Virginia will still need approved Scholarship Granting Organizations to serve students. But the opt-in question has been answered: West Virginia is in.

That places our state in a strong position to participate from the beginning.

Treasury Signals Implementation Is Moving Forward

Treasury officials have stated that proposed regulations are expected by the end of September 2026. That timeline matters because the program begins with tax year 2027, and states, SGOs, donors, schools, and families will need time to understand the rules and prepare.

The preview guidance addressed several key issues, including how SGOs may qualify, how scholarship funds must be accounted for, how student eligibility may be verified, and what safeguards may be required to prevent fraud and abuse.

Among the expected rules, SGOs will generally be required to spend at least 90% of their income on scholarships for eligible students. Treasury also previewed a safe-harbor approach that would allow certain scholarship organizations to measure that requirement using a segregated account containing qualified contributions and earnings.

Treasury also addressed what it means for an SGO to be “located in” a participating state. The expected rule would define an SGO as located in a state if it is authorized to do business there and complies with generally applicable charitable-organization rules, including transparency, accountability, and fraud-prevention requirements.

This is especially important because some SGOs may operate in more than one participating state. Treasury’s preview indicates that multistate SGOs may be allowed, provided they meet state requirements and maintain separate accounts for each participating state.

Schools, Homeschools, and Eligible Expenses

The Treasury preview also included important language regarding the definition of “school.” The proposed rules are expected to define schools broadly to include public, private, and religious schools providing K–12 elementary or secondary education as determined under state law.

Significantly, the preview states that a homeschool would be treated as a school if it is treated as a school under state law. That could be very important for West Virginia, where homeschooling continues to grow and where many families are already familiar with educational choice options.

Treasury also indicated that additional guidance will be issued later regarding eligible expenses. The preview specifically states that future guidance is expected to address tutoring and special-needs services. That is encouraging for families whose children need academic support beyond traditional classroom instruction.

Why This Matters for West Virginia

West Virginia may be especially well positioned to benefit from the new federal program.

Over the past several years, West Virginia has become one of the nation’s leading school-choice states through the Hope Scholarship. That program has already helped families understand how educational funds can be used for private schooling, homeschooling, tutoring, curriculum, and other qualified expenses.

The new federal tax-credit scholarship program could potentially operate alongside existing state programs, creating an additional source of educational opportunity for families. Final Treasury guidance will determine exactly how programs interact, but the federal initiative appears designed to complement state educational choice efforts rather than replace them.

For West Virginia’s Christian schools, private schools, and homeschool families, this could mean a new stream of scholarship support funded by voluntary charitable contributions rather than direct state appropriations.

This could be especially significant because West Virginia has strong existing educational choice infrastructure, a rapidly growing homeschool population, many rural communities where educational options can be limited, and a network of Christian schools already serving families across the state.

The West Virginia Christian Education Association represents more than 35 Christian schools and has worked for years to strengthen Christian education, support school leaders, encourage legislative engagement, and help families access educational opportunity. Now that West Virginia has elected to participate in the federal program, WVCEA schools and partner organizations have an important opportunity to inform families, encourage donors, and prepare for implementation.

Who Could Qualify?

Under the federal law, scholarship eligibility extends to students from households with income up to 300% of the area median income. That means eligibility may reach far beyond what many people traditionally think of as “low income.”

In practical terms, a substantial percentage of West Virginia families could potentially qualify if scholarship funding is available. Final regulations will provide more details on how income eligibility must be verified.

Treasury’s preview suggests that SGOs may be able to verify eligibility through documents such as paystubs, tax returns, IRS transcripts, W-2 forms, crediting agencies, commercial data sources, or participation in certain needs-based federal, state, or tribal programs. Foster children are also expected to satisfy the income requirement without separate income verification.

The goal appears to be a system that is reliable enough to protect the integrity of the program, but not so burdensome that families are discouraged from applying.

Accountability and Fraud Prevention

Supporters of school choice should welcome the fact that Treasury is already addressing accountability and fraud prevention. The preview guidance indicates that SGOs would be expected to obtain an annual financial and programmatic audit by a qualified independent third party and provide it to each participating state where the SGO is listed.

For smaller SGOs, Treasury is considering a more streamlined alternative involving an internal committee unrelated to management, with the report signed under penalties of perjury.

Participating states would also be expected to take reasonable steps to prevent duplicate awards for the same student and the same expense. One possible approach would involve a formal scholarship acceptance certifying that the family has not received another award for the same expense.

These safeguards matter. A program of this size will only succeed long term if it is transparent, accountable, and administered with integrity.

Accountability and Fraud Prevention

Supporters of school choice should welcome the fact that Treasury is already addressing accountability and fraud prevention. The preview guidance indicates that SGOs would be expected to obtain an annual financial and programmatic audit by a qualified independent third party and provide it to each participating state where the SGO is listed.

For smaller SGOs, Treasury is considering a more streamlined alternative involving an internal committee unrelated to management, with the report signed under penalties of perjury.

Participating states would also be expected to take reasonable steps to prevent duplicate awards for the same student and the same expense. One possible approach would involve a formal scholarship acceptance certifying that the family has not received another award for the same expense.

These safeguards matter. A program of this size will only succeed long term if it is transparent, accountable, and administered with integrity.

Donor Reporting and IRS Administration

Treasury is also previewing a donor-reporting system designed to support compliance without requiring SGOs to collect more sensitive information than necessary.

Under the expected approach, an SGO would provide each donor with a timely written acknowledgment showing the donor’s annual qualified contributions and a unique donor number generated under an IRS-approved method. Taxpayers claiming the credit would generally report that donor number on their federal tax return.

Treasury also expects an IRS portal to support SGO administration and reporting. The portal may be developed in phases, meaning all features may not be available immediately when the program begins. Still, this is a positive sign that federal officials are thinking through the practical administration of the program.

What Supporters Are Saying

Supporters believe the Education Freedom Tax Credit will empower parents rather than systems. They argue that parents should have more freedom to choose the educational environment that best fits their children’s needs.

They also point out that the program is funded through voluntary charitable contributions. Rather than appropriating additional state dollars, the program encourages individuals to give to approved scholarship organizations that serve eligible students.

For Christian schools, the program could provide an opportunity to expand access for families who want Christ-centered education but need financial assistance. For homeschool families, it could help with curriculum, tutoring, and other qualified expenses if the final rules allow. For students with special needs, future guidance on tutoring and services could be especially important.

What Opponents Are Saying

Critics of the program argue that school-choice efforts can draw attention and resources away from public schools. Some public-school advocates believe tax-credit scholarship programs may reduce public-school enrollment or increase inequality by making it easier for some families to leave traditional public schools.

These concerns are not new. They have been part of the national debate over school choice for many years and will almost certainly continue as the federal program moves toward implementation.

At the same time, supporters respond that the purpose of the program is not to harm public schools, but to help families find the right educational setting for each child. They argue that families should not be locked into one option simply because of their ZIP code, income level, or local school assignment.

Looking Ahead

The most important date is January 1, 2027. That is when taxpayers are expected to be able to begin making qualified contributions and claiming the federal tax credit.

Between now and then, Treasury and the IRS are expected to issue proposed regulations that will clarify how states participate, how SGOs qualify, how donors claim the credit, how scholarships are distributed, and how families qualify.

For West Virginia, the question is no longer whether the state will participate. West Virginia has elected to participate. The next question is how quickly and effectively West Virginia can prepare families, schools, donors, and scholarship organizations to make the most of this opportunity.

West Virginia has already taken major steps toward educational freedom through the Hope Scholarship. The federal Education Freedom Tax Credit could provide an additional opportunity to expand educational access, strengthen families, and support students across the Mountain State.

Because West Virginia already has school-choice infrastructure, a growing network of Christian schools, and many families familiar with educational choice programs, our state may be able to move more quickly than states that are just beginning to build these systems.

For Christian education, this could be a remarkable opportunity to serve more families, reach more students, and strengthen the work of schools committed to biblical truth and academic excellence.

The program is not fully operational yet, and many details still need to be finalized. But the direction is clear: federal school choice is moving closer to reality, West Virginia has chosen to participate, and our schools and families should be ready.

Preview of Forthcoming Section 25F Guidance

*Remarks delivered by Deputy Assistant Secretary for Tax Policy Kevin Salinger on Tuesday, June 9, 2026:

Treasury and the IRS expect to issue proposed regulations this coming back-to-school season – no later than the end of September. States, SGOs, and taxpayers will be able to rely on those proposed regulations for tax year 2027. But we recognize the need to plan, so today I’m going to preview key issues in those forthcoming proposed regulations. These items remain subject to ongoing legal review, but we intend for the proposed regulations to be consistent with this preview. Many of you have been eagerly awaiting this information, and Treasury is pleased to deliver it today.
 

Safe harbor for 90% in a segregated account. Let me start with the 90-percent spending requirement. As many of you know, an eligible SGO must spend at least 90% of the income of the organization on scholarships for eligible students. We expect the proposed rules will generally measure the 90-percent spending requirement against the organization’s total receipts, unreduced by expenses. But if the organization’s activities are largely scholarship-granting activities, the organization could use a safe harbor under which “income of the organization” is measured by the amount held in a section 25F segregated account, including qualified contributions and earnings. For a multistate SGO, that safe harbor would have to be satisfied separately for each State-specific segregated account.

“Located in the State.” The next issue is what it means for an SGO to be “located in” a participating State. We expect the proposed rules will define an SGO as “located in” a State if it is authorized to do business in that State and complies with generally applicable State charitable-organization rules, including rules for transparency, accountability, and fraud prevention. At the same time, States may not impose substantive SGO- specific requirements that are more restrictive than section 25F’s requirements.
 

Multistate SGO definition and eligibility standard. We also recognize that some SGOs may want to operate in more than one participating State, and the proposed rules are expected to provide a path for that. An SGO may be listed on more than one participating state SGO list as long as it is located in that State and maintains a separate section 25F account for that State. Most operational requirements would be applied separately to the State account, while certain organization-wide rules would apply to the multistate SGO as a whole.
 

Definition of school. We also expect to address the types of schools that may be served by scholarships under the program. We expect the proposed rules will define “school” consistent with section 530 to include public, private, and religious schools providing K–12 elementary or secondary education as determined under State law. Accordingly, a home school would be treated as a school if it is treated as a school under State law. We expect the proposed rules will clarify that K–12 schools operated by a federally recognized Tribe or tribal organization qualify as elementary or secondary schools.
 

Verification of student’s income qualification through direct income verification, categorical eligibility, foster- child safe harbor, and additional safe harbors. Another important implementation question is how SGOs can verify student eligibility in a way that is reliable, but not unnecessarily burdensome for families. We expect the proposed rules will allow SGOs to verify a student’s household income directly through documents such as paystubs, tax returns, IRS transcripts, Forms W-2, or through crediting agencies or commercial data sources. They also would allow determination of eligibility based on recent documentation that a household member participates in a needs-based Federal, State, or Tribal program with income limits at or below the specified threshold, and would treat foster children as satisfying the income requirement without separate income verification. We are also considering other safe harbors for students attending schools in low-income areas.
 

Preventing fraud and abuse. We know that States have raised real concerns about fraud and abuse, and our goal is to pair broad opportunity with strong, administrable safeguards. Each SGO would have to obtain an annual financial and programmatic audit by a qualified independent third party and provide it to each covered State on whose list it appears. For smaller SGOs, the proposed rules would allow a more streamlined alternative: the audit could be conducted by an internal committee unrelated to the organization’s management, with the report signed under penalties of perjury.
 

The audit is intended to make State oversight manageable. Rather than requiring States to recreate the compliance review from scratch, States could use the audit to help verify that each organization satisfies the requirements to be an SGO under section 25F, identify apparent deficiencies, and determine whether further inquiry or removal from the State list is appropriate.
 

Participating States would still be expected to take reasonable steps to prevent fraud and abuse, including processes to prevent duplicate awards to the same student for the same expense. One possible approach would be to require a formal scholarship acceptance certifying that no other award has been received for the same expense, but we welcome input on administrable ways to address this risk. We are also considering appropriate safeguards to help prevent misuse of scholarship funds.
 

Unique donor number reporting requirement. On the donor side, we are focused on a reporting approach that supports compliance without requiring SGOs to collect more sensitive information than necessary. The SGO would provide each donor a timely written acknowledgment of their annual contributions, including the total amount of the donor’s qualified contributions and a unique donor number generated under an IRS-provided method. The SGO would also report donor and contribution information to the IRS using the unique donor number, and taxpayers claiming the credit generally would report that number on their Federal return. This information can be used in a matching process that is intended to help prevent fraud by allowing the IRS to confirm that a claimed credit corresponds to an actual donor, an actual SGO, and qualified contributions reported by that SGO, without requiring a donor to provide his or her Social Security Number to the SGO.
 

Planned IRS SGO portal. We are also thinking ahead about the infrastructure needed to make administration easier over time. We expect the proposed rules will contemplate an IRS portal to support SGO administration and reporting. The goal is to build a user-friendly interface that can streamline interactions between SGOs and the IRS, but the precise functionality and timing may develop in phases rather than all being available on day
one.
 

Section 530 guidance. Finally, we know that many stakeholders are focused on the scope of eligible expenses, including services that help meet students’ individual needs. We recognize that additional guidance under section 530 regarding the scope of eligible expenses will be important, and we expect that to be a separate workstream that will follow the issuance of the section 25F proposed regulations. Consistent with the statutory text of section 530, we fully intend that scholarships may be used to support additive academic tutoring and special needs services, and we expect future guidance to address those issues in more detail.