Treasury Would Let Married Couples Claim Up to $3,400 Under the New School-Choice Credit — Dollar for Dollar, From 2027

Most tax breaks for giving are worth a slice of the gift. This one, as proposed, is worth all of it — up to a cap. Treasury’s draft rules, released Thursday, treat a married couple as two taxpayers for the new federal school-choice credit, Richard Rubin and Ashlea Ebeling report in Friday’s Journal. So a couple that gives $3,400 to qualifying scholarship-granting groups can take a full dollar-for-dollar credit — in effect choosing where $3,400 of its federal income tax goes. Last year’s tax law, which created the credit, capped it at $1,700 per taxpayer, and plenty of people watching expected joint filers to share that single $1,700.

The fine print is unusual, too. Tax year 2027 is the first year it applies, and nobody is income-tested out. Because it’s nonrefundable, the credit can’t exceed the income tax you’d otherwise owe; any unused amount rolls forward for up to five years. And the gift doesn’t double-dip: it earns the credit in place of a regular charitable deduction. The scholarship groups will steer the money to families with up to 300% of their area’s median income, and donors can’t earmark it for their own children. Private-school tuition for kindergarten through 12th grade is expected to absorb much of it, though public-school students qualify for help with services like tutoring, and public schools are still working out how to tap the program.

States opt in; donors don’t have to

Participation is a state-by-state call, and it governs who can receive scholarships, not who can give. Treasury counts 30 states in so far; Democratic-run states have largely stayed out, concerned that the program could lift private schools and pull students from public ones. A donor living in a state that hasn’t joined can still give to a group in another state and take the federal credit. Counting couples twice also raises the price tag: Treasury’s estimate for 2030 is 11 million taxpayers giving $26 billion a year, enough for up to 2.2 million full-time scholarships. Last year, Congress’s Joint Committee on Taxation pegged the fiscal 2030 federal cost at $3.4 billion.

Our read

This is a Tax piece, and we’re not taking sides on school choice — that’s a debate for voters and legislatures. The planning point is the mechanism. A deduction trims taxable income, so for an itemizer it’s worth only the bracket’s slice of a gift. A dollar-for-dollar credit comes off the tax itself. For a donor who owes at least that much income tax, a gift up to the cap costs nothing net, though the cash leaves when you give and the credit shows up when you file. Nonrefundability matters most for retirees with modest taxable income and others with little income-tax liability: no liability, no benefit that year, and the five-year carryforward is the only cushion.

The state question is narrower than it sounds. Your state’s choice decides whether students near you can receive scholarships, not whether you can claim the credit. And keep the credit in its lane: since donors can’t direct the money to their own kids, it’s no substitute for a 529, which is still the tool for your own children’s or grandchildren’s education. Put both on the 2027 tax-planning list next to the giving you already do, and remember these are proposed rules that can change before then. Pack that umbrella this fall, while the forecast is still just a forecast.