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Supporters say it will give parents more freedom to choose their child’s education. Critics see a tax break for the wealthy that will undermine public schools.

The new law allows a taxpayer to donate up to $1,700 to a nonprofit scholarship organization and subtract that amount from whatever they owe the IRS for federal income taxes.

“The average private school in the United States is upwards of $12,000 a year. Which makes it very unlikely that this tax credit will let anybody who is not already affluent access private schools,� said Zahava Stadler, project director of the education equity initiative at New America, a left-leaning think tank.

Taxpayers can start using the new credit in 2027, if their state opts in.

ÃÛèÖÖ±²¥ Gov. Katie Hobbs, a Democrat who has blasted the state’s voucher program as a colossal drain on the budget, hasn’t said whether she will do so. Her office did not respond to numerous requests for comment.

Roughly 4.7 million children are already enrolled in private K-12 schools, according to the Institute on Taxation and Economic Policy, a nonprofit that analyzes the tax system with an eye on racial and economic equality. If only one parent of each child takes advantage of the new federal entitlement, that would reduce federal revenue by $8 billion.

“There is no other cause – not children’s hospitals, veterans’ groups, or disaster relief – that taxpayers can contribute to and see the entire cost of their contribution bankrolled by the federal government,� Carl Davis, research director at the institute, wrote last week.

Robert Enlow, president and CEO of EdChoice, a national group that advocates for school choice, sees the new tax credit as beneficial for families and schools.

“What is good about this bill is that it is a permanent dollar-for-dollar tax code,� he said, “What is bad about this bill is it’s only $1,700 and it only applies to individuals.�

Thirty states have some form of school vouchers or tax deductions that provide subsidies for parents to send children to private or parochial school. ÃÛèÖÖ±²¥ has both.

The federal tax credit will stack on top of any state subsidy.

“That’s a huge benefit for families who are in that middle and lower income section,� Enlow said.

In addition to vouchers, ÃÛèÖÖ±²¥ also offers tax credits for private schooling. That program — created in 1997 — allows a $3,062 credit for married couples and about half that for individuals.

In 2022, Gov. Doug Ducey, a Republican, signed legislation vastly expanding a voucher program created to help disabled students to all students.

At last count, there were more than 84,000 students enrolled in the Empowerment Scholarship Accounts program at a cost to state coffers of $880 million — more than $10,000 per child — according to the Learning Policy Institute.

The vouchers can be used for private K-12 tuition and homeschooling, and are available to families regardless of income. Families can take advantage of both ESAs and the tax credit.

Hobbs calls the ESA program “unsustainableâ€� and, like other ÃÛèÖÖ±²¥ Democrats, has sought unsuccessfully to repeal it.

In January, she proposed a means test that would start to reduce the entitlement for families with income above $100,000, cutting off entirely at $200,000. Republicans, who control the Legislature, rejected it and other changes to rein in the voucher program.

At the federal level, the One Big Beautiful Bill law narrowly passed in the House and Senate.

To win over some GOP lawmakers from blue states, a provision was added to ensure that states like California and New York, where voucher proposals have been unpopular, aren’t forced to participate.

For taxpayers in each state to take advantage of the $1,700 tax credit, their governor would first have to opt in. States would submit lists of approved organizations to accept donations for this credit.

Colleen Hroncich, a policy analyst for educational freedom at the libertarian Cato Institute, supports school choice but objects to the federal tax credit on grounds that private schools could become reliant on the government.

“If schools get hooked on scholarship money, and then states increase regulation, then schools will become less free and less independent and less able to be an alternative,� she said.

Hroncich also critiques the program’s inclusion as federal overreach.

“There’s no mention of education in the Constitution. So as far as I’m concerned, the federal government shouldn’t be doing anything regarding education in most cases,� she said.

Congress has been moving in this direction. The 2017 tax cuts that Trump signed into law expanded the use of 529 plans to secondary schools. The plans were created to help parents save for college by investing tax-free.

Trump has also largely dismantled the federal Department of Education, fueling suspicions by Democrats and teacher groups about the real motivations behind taxpayer support for private and parochial schools.

Stadler called the new tax credit a “much more aggressive form of the Trump administration using federal legislation� to shift funds away from public schools.