Proposed Federal Tax Credit Could Supercharge School Choice in Tennessee

Photo of a classroom (Photo by Kaboompics.com/Pexels)

A newly proposed federal tax credit known as the Educational Choice for Children Act could open the door to sweeping changes in how Tennessee families pay for their children’s education. By offering a 100 percent dollar-for-dollar federal tax credit for donations to private school scholarship organizations, the bill would allow individuals to redirect their tax dollars to educational causes, potentially reshaping Tennessee’s K–12 landscape.

A Federal Tax Program, Not an Education Mandate

Supporters of the bill draw a distinction between this initiative and traditional federal education policy. As Shaka Mitchell, a senior fellow at the American Federation for Children, explains, the proposal shifts focus from government-managed education to taxpayer-driven choice.

Shaka Mitchell (Photo by the American Federation for Children)

“This isn’t an education program,” said Mitchell. “It’s a tax program.”

Under the proposed legislation, taxpayers could donate to a certified scholarship-granting organization (SGO) and receive a federal tax credit of equal value. Unlike traditional charitable deductions that reduce taxable income, this credit would directly reduce a donor’s tax bill, dollar for dollar.

The scholarships would then be distributed to eligible K-12 students to use for a range of educational needs, including tuition, tutoring, and homeschooling costs, regardless of whether they attend private, public, or charter schools.

Emboldening Tennessee’s School Choice Landscape

Tennessee is already home to multiple programs that allow families to use tax dollars to send their kids to private school, including the newly launched Education Freedom Scholarship (EFS) program, the existing Education Savings Account (ESA) program, and the Individualized Education Accounts (IEA) for students with disabilities. Mitchell said the new federal program wouldn’t compete with these efforts but rather amplify them.

“For states like Tennessee that already have choice infrastructure, this federal credit would be like highlighting the word and clicking ‘bold,’” Mitchell said. “It doesn’t replace what we have. It accelerates it.”

In practice, a family in Memphis might already be receiving funds through the state’s ESA program. With the new federal incentive, they could also qualify for a scholarship funded by private donations, essentially stacking resources to support their child’s unique educational needs.

A Missing Piece: Scholarship Infrastructure

But there’s a catch.

Mitchell points out that Tennessee currently has minimal nonprofit infrastructure to distribute these funds.

“There’s one SGO in Memphis that’s doing good work,” Mitchell noted, referencing the Memphis Opportunity Scholarship Trust. “But Nashville doesn’t even have one. Knoxville and Chattanooga either.”

To fully take advantage of the program, he says new organizations would need to emerge, particularly in areas currently underserved by private philanthropy.

Rural Realities: Opportunity or Oversight?

Critics who frequently refer to these programs as “vouchers” have long raised concerns about rural accessibility. In Tennessee’s more remote counties, where private schools are scarce and public schools serve as community anchors, some wonder if those families would draw benefits.

Mitchell acknowledged the disparity but sees potential.

“Incomes in rural areas tend to be lower, and the capital just isn’t there to access private schools,” he said. “But programs like this free up that capital. They send a signal to school leaders that they can start a school in these communities, and that families will be able to afford it.”

He expressed optimism that the proposed program could encourage new educational opportunities in rural Tennessee.

“I think there will be mission-driven education leaders in rural areas that will want to start schools in these rural communities because capital will be freed.”

What’s Next?

If the federal tax credit bill passes as part of the annual budget process, Tennessee will need to act swiftly to establish scholarship infrastructure, educate families, and coordinate with existing programs. The state's Department of Education has not yet commented on how it would interface with the proposed program.