The Federal Scholarship Tax Credit California Is Sitting Out

Gov. Gavin Newsom has the chance to reshape educational opportunity in California before he leaves office. The question is: Will he take it?

Beginning Jan. 1, 2027, taxpayers will be able to claim a federal tax credit of up to $1,700 — or up to $3,400 for married couples filing jointly — for contributions to qualified nonprofit scholarship granting organizations (SGOs) that provide K–12 scholarships for education expenses.

While California taxpayers can get the benefit, students can only receive scholarships if their state chooses to opt in.

So far, 30 states have opted in. So why hasn’t Newsom signed up?

Sadly, too many Democrat governors are sidelining the program because the national teachers’ unions have disingenuously labeled the tax credit as a “voucher” program. Nothing could be further from the truth.

The federal scholarship program is a tax credit that would not require a dime of new state spending. Here’s how it would work:

• Gov. Newsom would opt in to the federal program.
• California would then identify and submit a list of qualified Scholarship Granting Organizations to the IRS.
• Taxpayers could donate directly to one of those approved nonprofit SGOs and receive a dollar-for-dollar federal income-tax credit.
• The SGOs — not Sacramento — would establish their scholarship criteria, verify eligibility and select the students who receive awards.
• California students could use those scholarships for tuition, tutoring, books, school supplies, special-needs services, computers and other qualified K–12 education expenses.

That’s it. No new California program. No appropriation from the state General Fund. No new tax on Californians.

The timing could hardly be better. Parents are fed up with traditional teacher union-controlled schools that prioritize indoctrinating students instead of teaching academic fundamentals. Since the pandemic, California public schools have lost more than 430,000 students — roughly a 7 percent decline in just six years. In 2025–26, Golden State public schools lost nearly 75,000 students in a single year.

California has ranked #1 for outbound U-Haul migration for six straight years, as families flee to states that offer a lower cost of living and better public schools. What better way to keep families in the Golden State than to support a scholarship program that will allow families to choose the best education option for their child?

And contrary to union claims that the tax credit will primarily benefit families who choose to attend private schools, scholarships can also support students attending public and charter schools. Students from households earning up to 300 percent of their area’s median gross income, adjusted for household size, could qualify. Federal officials estimate that approximately 96 percent of children in participating states would be eligible for scholarships.

The teachers unions also argue that school districts will lose funding. But per-pupil spending in California will remain robust — on average, more than $27,000 per student annually in the latest state budget. What unions really mean is that school funding is tied to average daily attendance — or the number of students that actually show up each day. Shrinking student bodies mean fewer teachers, cafeteria workers, bus drivers and janitors — and fewer dues-paying union members.

But no student should be trapped in a failing school simply to protect a union’s bottom line.

“It’s a no-brainer for California to opt in to the federal scholarship tax credit,” said Lance Christensen, CPC’s Vice President of Government Affairs and Education Policy. “We encourage Gov. Newsom to look past politics-as-usual and take this opportunity to see that everyone benefits, including teachers, when students and families have more resources for their education in public, charter or private schools.”

The Education Freedom Tax Credit was enacted as part of President Trump’s One Big Beautiful Bill, and the U.S. Treasury Department released its highly anticipated regulations on Oct. 1. While the regulations remain open for public comment, Treasury officials have indicated that scholarship granting organizations and taxpayers can rely on them for the 2027 tax year.

What can you do to support the scholarships?

You can write a letter to Gov. Newsom and urge him to opt in. See our sample letter below.

If the governor doesn’t opt in, you can still support school choice and take advantage of the tax credit by donating to scholarship programs in participating states.

Let’s hope Gov. Newsom keeps those scholarship dollars in the Golden State to support California students.

Sample Letter

Tell Gov. Newsom you support California opting in to the Federal Scholarship Tax Credit program. Use the template below or write your own message and send it to the Governor’s Office at the address provided.

Governor Gavin Newsom
1021 O Street, Suite 9000
Sacramento, CA 95814

Dear Governor Newsom,

I am writing to express my support for California opting in to the Federal Scholarship Tax Credit program beginning Jan. 1, 2027. The program allows taxpayers to receive a federal tax credit of up to $1,700 for contributions to qualified Scholarship Granting Organizations — or up to $3,400 for married couples filing jointly. An analysis by the American Federation for Children estimates that more than 5.9 million California children — 92.4% of the state’s K–12 students — could qualify for scholarships under the program, creating an opportunity to bring additional education funding to students in public, charter and private schools.

By opting in, you’ll leave a legacy that could expand educational choice for California families. I urge you to have California participate in the program so eligible students and families can benefit from these scholarship opportunities for decades to come.

Sincerely,
[Your Name]