Hochul Announces New York Will Participate in Federal Scholarship Tax Credit Program

by CrownHeights.info

New York Governor Kathy Hochul announced Friday that New York will participate in a new federal scholarship tax credit program set to take effect in 2027, opening the door to additional funding for students attending public, private and religious schools, including yeshivos.

The program, established under the federal One Big Beautiful Bill Act, allows eligible taxpayers to receive a federal income tax credit of up to $1,700 annually for cash contributions to approved Scholarship Granting Organizations (SGOs). These nonprofit organizations distribute scholarships to eligible elementary and secondary school students to help cover qualifying educational expenses.

Hochul said New York’s participation followed a review of federal regulations and her determination that the program could bring additional resources to students without reducing funding for public schools or drawing from state and local budgets.

“I’m not going to leave money on the table when it could help our kids,” Hochul said, adding that she had been engaging with business leaders who committed to using the program to support public school students and their academic needs.

The governor emphasized that her decision does not change her commitment to public education, pointing to more than $10 billion in increased school funding during her administration and the state’s full funding of Foundation Aid for the first time.

How the Tax Credit Works

Beginning January 1, 2027, eligible taxpayers will be able to donate money to qualifying Scholarship Granting Organizations and claim a dollar-for-dollar federal income tax credit of up to $1,700 per year. The credit is a reduction in federal income tax owed, rather than a deduction that merely reduces taxable income.

For example, a taxpayer who donates $1,000 to a qualifying organization could claim a federal tax credit of $1,000, subject to the program’s rules and the taxpayer’s tax liability. The maximum credit is $1,700 per taxpayer per year.

The donations are pooled by scholarship organizations and used to provide financial assistance for qualifying K-12 education expenses. Depending on the program and the student’s circumstances, that assistance may help pay for private school tuition, tutoring, educational materials and other eligible services.

To qualify for the federal credit, donations must meet federal requirements, and the scholarship organization must be recognized under the program’s rules and associated with a participating state. New York’s participation is an important first step, but the state must also complete the process of identifying eligible organizations before donations can qualify under the program.

The law generally limits scholarship eligibility to students whose household income does not exceed 300% of the area’s median income. The program is designed to serve students from low- and middle-income families, although individual scholarship organizations may establish additional eligibility requirements within the federal rules.

Importantly, the tax credit is available to qualifying donors, not a direct payment from the government to parents. Families seeking assistance will need to apply through participating scholarship organizations and meet the applicable requirements.