Kentucky stakeholders begin statewide effort to maximize new federal scholarship tax credit for students

Oct. 2, 2026
Contact: Lisa McKinney, Communications Director, The Prichard Committee
(cell) 859-475-7202
lisa@prichardcommittee.org

New federal tax credit could generate millions for K-12 educational opportunities as Kentucky prepares for 2027 implementation

LEXINGTON, Ky–With a new federal tax credit set to take effect in 2027, Kentucky education, business, philanthropic and community stakeholders are working now to ensure the Commonwealth is prepared to maximize new scholarship opportunities for public school K-12 students and families.

The Prichard Committee for Academic Excellence convened stakeholders Friday in Lexington to begin developing a coordinated statewide strategy for Scholarship Granting Organizations (SGOs), which will direct private contributions toward scholarships covering education expenses such as tutoring, afterschool programs, supports for students with special needs, and more.

Beginning in 2027, individual taxpayers may claim a federal tax credit of up to $1,700 for qualifying contributions to approved SGOs. Married couples filing jointly may claim up to $3,400 based on each spouse’s contributions. An early projection discussed at Friday’s meeting estimates the program could generate as much as $200 million for Kentucky over its first four years.

“This is a way to put additional resources in the hands of Kentucky families so they can participate in educational opportunities that help their children succeed in the classroom,” said Brigitte Blom, president and CEO of The Prichard Committee for Academic Excellence. “But the opportunity doesn’t begin in 2027. The work to build the infrastructure, partnerships and trust needed to make these dollars effective has to happen now to maximize opportunity for public school students.”

The Federal Scholarship Tax Credit was created under federal law and allows qualifying donations to Scholarship Granting Organizations to generate a federal tax credit for donors. Kentucky opted into the program through House Bill 1, which became effective July 15. The Kentucky Secretary of State’s Office is responsible for compiling the state’s list of eligible SGOs and submitting it annually to the IRS.

Organizations seeking inclusion on the state’s SGO list must file a declaration with the Secretary of State by Nov. 30. Organizations must generally be recognized as 501(c)(3) nonprofits and meet federal requirements governing scholarship spending, student eligibility, accounting, reporting and other aspects of program administration.

The federal program requires SGOs to use at least 90% of qualifying contributions for scholarships and provide scholarships to at least 10 eligible students who do not all attend the same school.

The Prichard Committee’s parent survey, conducted in partnership with 50CAN, underscores the potential demand for additional educational opportunities outside the traditional school day. Just 21% of Kentucky parents reported that their children were accessing tutoring, compared with 24% nationally. Participation was also lower in Kentucky for supervised summer learning and supervised after-school programs.

Participants at Friday’s meeting discussed how Kentucky can design an SGO system that reaches families statewide, particularly families with the greatest needs; encourages employer participation; builds donor confidence through clear goals and outcome reporting; coordinates resources and capacity; and ensures the federal tax credit supplements rather than supplants public investment in education.

The meeting also included a national perspective from Dr. Joshua Cowen, professor of education policy at Michigan State University, and a discussion of implementation and regional coordination with Will Hodges of the Kentucky Education Fund, an approved Scholarship Granting Organization.

Stakeholders identified a range of potential roles for organizations participating in the emerging system, including serving directly as SGOs, providing operating or philanthropic support, connecting eligible families with participating SGOs, partnering with schools and communities, and helping disseminate accurate information about the program.

As Kentucky moves toward implementation, participants also identified questions that will require continued attention, including how SGOs can respond to local and regional needs, how to ensure quality among eligible educational services, and how to prevent unintended consequences while maximizing the program’s benefit to Kentucky students and families.

“Kentucky has a chance to build something that is coordinated statewide while still responding to what families and communities need locally,” said Blom. “That will require schools, donors, businesses, community leaders and regional partners working together.”

The Prichard Committee’s briefing has compiled resources for nonprofits, school districts and donors to navigate the new tax credit at https://prichardcommittee.org/the-federal-scholarship-tax-credit/.

About the Prichard Committee for Academic Excellence 

The Prichard Committee believes in the power and promise of public education –early childhood through college– to ensure Kentuckians’ economic and social well-being. We are a citizen-led, non-partisan, solutions-focused nonprofit, established in 1983 with a singular mission of realizing a path to a larger life for Kentuckians with education at the core.