Federal vs State Tax Credit Programs: Complete Comparison Guide for 2026

The federal Education Freedom Tax Credit and state-level tax credit scholarship programs are similar but not the same. The federal program offers a federal income tax credit up to $1,700 per tax return, while state programs vary widely in structure, credit amounts, and eligibility. 

Donors can claim both federal and state credits (in participating states) by making separate contributions. This is a massive opportunity for donors to potentially receive up to $1,700 in a federal tax-credit on top of a state tax-credit.

The Federal Tax Credit Program

The Educational Choice for Children Act passed July 4, 2025, creating America's first federal scholarship tax credit program. Key details include:

• Jurisdiction: Nationwide for any state that opts in
• Tax Type: Federal income tax credit
• Credit Amount: Up to $1,700 per tax return (single or joint filing)
• Launch Date: January 1, 2027
• Cap: No federal cap on total credits issued
• State Participation: States must opt in; not automatic
• Oversight: U.S. Department of the Treasury and IRS

State Tax Credit Scholarship Programs

Currently, ~30 states have their own tax credit scholarship programs. These pre-date the Education Freedom Tax Credit program and vary significantly by state.

• Jurisdiction: Individual state programs
• Tax Type: State income tax credits (and some corporate tax credits)
• Credit Amount: Varies widely by state 
• Maturity: Some programs date back to 1997
• Caps: Most states have annual program caps
• State Authority: Each state controls its own program
• Oversight: State departments of revenue and education