Federal Tax Credit: What You Need to Know About the Educational Choice for Children Act
Brief Overview of H.R. 833
The H.R. 833, which is also referred to as the Educational Choice for Children Act (ECCA) of 2025, is a bill that establishes a federal tax credit for individuals who give charitable donations to nonprofit organizations that provide education scholarships to qualified elementary and secondary students.
The proposed bill plays a role in education reform by encouraging donations to scholarship-granting organizations through a federal tax credit. This allows for the allocation of funds to help cover tuition costs for low- and middle-income students seeking alternative educational options, like private, charter schools or even homeschools. By supporting school choice and fostering public-private partnerships, the bill can provide families more control over their children’s education. It can also promote innovation and competition within the education system.
A full-text copy of the Educational Choice for Children Act of 2025 is available for free at: Congress.gov
H.R. 833 Significant Importance
Taxpayers
The bill essentially creates an incentive for donations to SGOs like the Children’s Tuition Fund by providing tax credits for those contributions. This allows taxpayers to support educational choice while potentially reducing their tax burden.
Brief Overview of H.R. 833
Schools
By providing students with greater access to tuition funding, the tax credit scholarship could increase enrollment for schools, especially private and charter institutions. It also encourages more competition among schools, and potentially leads to better educational outcomes.
Students and Parents
H.R. 833 seeks to increase access to alternative educational options. In essence, families will be able to choose the best educational arrangement for their children, whether it be a private school or a specialized learning environment, ultimately offering more flexibility in how education is delivered.
Overview of H.R. 833
Summary of the Bill
The Educational Choice for Children Act introduces a federal tax credit designed to encourage donations to nonprofit organizations that fund education scholarships. These scholarships aim to provide elementary and secondary school students from low- and middle-income families with financial assistance for tuition and other education-related expenses.
The main provisions and scope of the H.R. 833 are as follows:
Tax Credit for Contributions
Individuals can claim a nonrefundable federal income tax credit for donating to scholarship-granting organizations. The credit is capped at whichever is greater between 10% of adjusted gross income or $5,000 per year.
Eligibility Criteria for Scholarships
Scholarships are reserved for students from households with incomes up to 300% of the area median gross income see HUB website. Priority is given to students previously awarded scholarships and their siblings.
Qualified Expenses
Funds can be used for tuition at private or religious schools, curriculum materials, standardized test fees, educational therapies for students with disabilities, and even homeschool-related costs.
Oversight and Accountability
Scholarship-granting organizations must meet strict requirements, including independent audits, income verification of recipients, and compliance with anti-fraud measures.
This bill represents a shift in federal policy, leveraging tax incentives to promote educational opportunities outside of the public school system. It should also be emphasized that the tax credit scholarship serves as a mechanism to fund education for low- and middle-income families.
Goals and Objectives
This Act aims to address financial barriers in education by achieving the following objectives:
Other cosponsors who later supported the bill are the following:
Promoting school choice
The bill encourages providing scholarships to low- and middle-income families to give them education options beyond public schools.
Focusing on educational equity
H.R. 833 intends to bridge gaps in educational access as reflected in its emphasis on assisting families with limited financial resources and on offering priority to previous recipients and their siblings.
Providing continued financial support for families
The proposed tax credit scholarship gives priority to students who previously received scholarships and their siblings, ensuring consistent access to educational opportunities for families already benefiting from the program.
Promoting school choice
Key Sponsors and Legislative Status
The Educational Choice for Children Act was first introduced as H.R.9462 on September 6, 2024, with the 118th Congress. It has since become H.R. 833 of the 119th Congress and is sponsored by Representative Adrian Smith [R-NE-3].
The original cosponsors when the proposal was introduced are:
Rep. Virginia Foxx [R-NC-5]
Rep. Rudy Yakym [R-IN-2]
Rep. Mike Kelly [R-PA-16]
Rep. Jim Jordan [R-OH-4]
Rep. Burgess Owens [R-UT-4]
Rep. Guy Reschenthaler [R-PA-14]
Rep. Byron Donalds [R-FL-19]
Rep. Randy Feenstra [R-IA-4]
Rep. Nicole Malliotakis [R-NY-11]
Rep. Claudia Tenney [R-NY-24]
Other cosponsors who later supported the bill are the following:
Rep. Mariannette Miller-Meeks [R-IA-1]
Rep. Elise M. Stefanik [R-NY-21]
Rep. Julia Letlow [R-LA-5]
Rep. Steve Scalise [R-LA-1]
Rep. Tim Walberg [R-MI-5]
Rep. Greg Pence [R-IN-6]
Rep. Brandon Williams [R-NY-22]
Rep. Michael Lawler [R-NY-17]
Rep. John R. Moolenaar [R-MI-2]
Rep. Brad R. Wenstrup [R-OH-2]
Rep. Vince Fong [R-CA-20]
Rep. Jefferson Van Drew [R-NJ-2]
Rep. Thomas H. Kean [R-NJ-7]
The Educational Choice for Children Act of 2025 is recognized as the first nationwide school choice bill that passed the U.S. House Committee on Ways and Means. It won the committee’s favor on September 11, with a vote of 23-16.
Tax Credit Explained
How the Tax Credit Works
The bill introduces a tax credit aimed at incentivizing individual contributions to scholarship-granting organizations that provide financial aid for elementary and secondary education. This offers a nonrefundable income tax credit to individuals who make qualified charitable contributions to these organizations.
Mechanism of the tax credit
The tax credit operates by allowing taxpayers to receive a credit based on their “qualified contributions,” which refers to donations made in cash or marketable securities to a scholarship-granting organization that meets specific requirements, such as providing scholarships for eligible students’ educational expenses.
The tax credit is calculated as the aggregate amount of contributions made during the taxable year, up to a limit set by the proposal.
Maximum allowable tax credit and its financial implications for donors
The maximum amount of the tax credit that a donor can receive is the greater of:
- 10% of the taxpayer’s aggregate gross income for the year, or
- $5,000.
This means that the credit can provide significant tax savings for those who contribute generously to scholarship programs. For example, a taxpayer with a gross income of $100,000 could potentially claim up to $10,000 (10% of their income), though the $5,000 cap would limit the credit to that amount.
Additionally, if the tax credit exceeds the donor’s income tax liability for the year, the excess credit can be carried over to future years, but only within a five-year period. This feature allows donors to benefit from their contribution even if their current tax burden is lower than the available credit.
Businesses are also allowed to participate in the tax-credit. Their limit is 5% of their taxable income.
Federal tax credits vs standard deductions
A key distinction between tax credits and standard deductions lies in how they reduce a taxpayer’s liability.
While a standard deduction reduces the taxable income, a tax credit directly reduces the amount of tax owed. In other words, tax credits are more advantageous because they provide a dollar-for-dollar reduction in tax liability.
For example, if a taxpayer owes $4,000 in taxes and qualifies for a $5,000 tax credit, the credit would reduce the amount owed to zero. In contrast, if the same taxpayer were to claim a standard deduction, the reduction in tax would be based on their taxable income, often resulting in less of a reduction in their final tax bill.
The H.R. 9462 tax credit therefore stands out by offering a direct financial benefit for those who choose to support educational scholarships, incentivizing charitable giving while providing tangible savings on taxes.
Eligible Contributions
and Organizations
Organizations qualifying for tax credit eligibility
H.R. 833 outlines the specific criteria that organizations must meet to qualify for the tax credit. These organizations, known as scholarship-granting organizations (SGOs), must adhere to the following requirements:
- The organization must be a nonprofit that is officially recognized by the government as tax-exempt (as defined under Sections 501(c)(3) and 501(a) of the IRC). It also must not be classified as a private foundation.
- The primary activity of the organization must involve providing scholarships for qualified elementary or secondary education expenses for eligible students.
- The organization must maintain separate accounts exclusively for qualified contributions to prevent the co-mingling of funds with other amounts.
- The organization must either: meet the detailed requirements to be classified as a scholarship granting organization, or have been eligible at the date of enactment to receive contributions that qualify donors for a State tax credit if used for providing scholarships.
- No officer or board member of the organization may have a felony conviction.
Furthermore, the bill encourages a variety of contributions by specifying the types of donations that qualify for the tax credit. These include:
- Cash donations
- Marketable securities
- Tangible assets, such as real estate or valuable items, provided they are appropriately valued and meet donation criteria.
These flexible donation options allow individuals and businesses to contribute in ways that align with their financial capabilities, making participation more inclusive.
Requirements for Ensuring Eligibility of Contributions
For the contributions to be eligible, the student-benefactors of the scholarship must belong to households with an annual income not exceeding 300% of the area median gross income and be eligible to enroll in a public elementary or secondary school
Here are the other requirements to ensure contributions are eligible:
- Scholarships must only cover qualified elementary or secondary education expenses.
- Priority must be given to students who received scholarships in the previous year and their siblings.
- Contributions cannot be earmarked or reserved for specific students.
- The organization must verify the income and family size of eligible students to ensure scholarships are limited to households meeting defined income thresholds.
- Annual financial and compliance audits must be conducted by an independent certified public accountant, with certification of completion submitted to the Secretary of the Treasury.
Eligibility for Scholarships
Income Thresholds and Criteria
Eligible students or those qualified for the scholarships must:
Belong to a family with a household income not exceeding 300% of the area median gross income,
based on the guidelines under Section 42; and
Be eligible to enroll in a public elementary or secondary school
For example, if the typical household income in your city is $50,000, families earning $150,000 or less may qualify.
Coverage for Educational Expenses
Below are the salient points regarding what is considered as “qualified elementary or secondary education expense” under the bill.
Tuition for both public and private schools
Fees associated with nationally standardized tests, Advanced Placement exams, and college or university entrance exams
The cost of curricular materials, instructional materials such as books, and online educational content
Costs for dual enrollment programs at higher education institutions
Educational therapies for students with disabilities, provided by licensed or accredited professionals
Expenses related to assistive technologies and other necessary accommodations
Requirements for Ensuring
Eligibility of Contributions
Qualifications to Operate
To qualify for participation in the tax credit, an organization must be a registered 501(c)(3) nonprofit, ensuring it is tax-exempt and not classified as a private foundation.
It is also required to serve students from at least two schools, ensuring its services reach a broad range of students and promoting diversity and accessibility within the scholarship program.
Operational and Financial Guidelines
Scholarship-granting organizations must undergo annual audits by an independent certified public accountant to ensure financial integrity and compliance with applicable regulations.
The organization must also adhere to both federal and state laws regarding its operations, ensuring that all scholarships are allocated properly and legally.
Furthermore, qualified organizations must maintain clear records to ensure transparency and to demonstrate that the funds are used exclusively for qualifying educational expenses.
Impact Analysis
Potential Benefits
This broadens educational opportunities for low- and middle-income families, who may otherwise struggle to afford quality education, by offering scholarships to eligible students.
Investment in the education sector is boosted and dependence on government support or public funding is reduced, thanks to the tax credit incentive that encourages private donations to scholarship-granting organizations.
Healthy competition among schools is maintained as the availability of scholarships is increased, leading to improvements in educational quality and ensuring institutions strive to meet higher standards to attract students.
Criticisms and Counterarguments
In separate open letters, the National Education Association and the National Coalition for Public Education have voiced their concerns against the Educational Choice for Children Act of 2025 (H.R. 833).
Criticism No. 1: Diverting funds from public schools
Detractors argue that the bill diverts taxpayer dollars away from public schools to private schools, and thus, eroding the public education system, which is viewed as essential to democracy. They also assert that such voucher-inspired programs lack evidence of improving student outcomes, reduce public accountability, and diminish protections and rights for students, particularly those with disabilities. It also highlights concerns about higher costs, potential violations of the separation of church and state, and the inability to sustain dual funding for both private and public education systems.
Counterargument: Complementing, not replacing, public funding.
The proposed H.R. 833 addresses the criticism by presenting its tax credit as a complementary initiative that promotes private investments in education rather than diverting existing public school funding. The provision of tax incentives for donations to SGOs that are dedicated to enhancing educational opportunities for low- and middle-income families is emphasized in the bill, complete with auditing and verification measures to ensure eligibility of students receiving the scholarship.
By structuring the program as an incentive for private contributions rather than a direct allocation of taxpayer dollars to private schools, the Act aims to avoid reducing the budgets of public schools. Moreover, the bill maintains the funding structure of public education while emphasizing the idea that families should have access to more educational choices. The point is that the bill provides a mechanism that enhances the overall education ecosystem instead of replacing public education.
Criticism No. 2: Lack of accountability
Opponents of the bill highlight concerns about the lack of accountability and oversight in private voucher programs, citing evidence of ineffective academic outcomes, discrimination, and financial mismanagement.
Counterargument: Measures to prevent misuse of funds.
The bill includes clear criteria and requirements for SGOs to maintain financial transparency, undergo independent audits, and adhere to legal compliance standards. These measures aim to prevent misuse of funds and ensure accountability.
Myths and Misconceptions
Debunking Myths
Myth: School choice takes money from traditional public schools
When a state passes a school choice program, money is never diverted from the state education budget; in fact, in many states the education budget was increased dramatically as part of the passage of the choice program.
Myth: Private schools are unaccountable (how can we make sure kids are getting a good education?)
Private schools face the ultimate accountability: if they do not do a good job, parents will unenroll their students.
Myth: Students do not benefit from private education
Most if not all students who benefit from choice programs are coming out of public schools that are deemed “failing” by their state board of education. At the end of the day, this program is about giving parents a choice.
Myth: School choice hurts public schools
Public schools get to keep almost all the federal and local tax dollars and usually a portion of the state funds allocated for each child. As homeschool public and private school enrollment increases school districts’ test scores improve (Cebula, Hall, Tackett 2016).
Myth: School Choice programs are not inclusive
Not every public school has to take every child. If a student has a special need or wants a special type of programing, the local public school is not required to provide it. The district may set up the service at another location and bus the student all the way across town to participate. Why should there be a different and more onerous standard put on a private school with a different mission and fewer resources at its disposal? If a public school isn’t required to take every child, why should we require a private school to take every child?
Students in school choice programs come from every race, gender, sexual orientation, and ability level. There is a misbelief that school choice programs deny underprivileged students. School choice programs create opportunity for underprivilege students.
Practical Examples
How Donors Can Maximize Their Tax Savings While Supporting Education.
They include public, private, and religious elementary or secondary schools, as well as homeschooling programs that comply with applicable state law.
Conclusion
To summarize, H.R. 833 promotes educational choice and equity by offering tax credits for contributions to scholarship organizations in order to help families from diverse income backgrounds access a wider range of educational opportunities.
By reducing financial barriers, the bill has the potential to transform educational access to empowering families to choose schools and programs that best fit their children’s needs, and ultimately, fostering a more equitable education system.
For more in-depth insights about H.R. 833, check out our related articles here:
How H.R. 833 Could Impact Federal and State Tax Policies
Ensuring Accountability: Transparency in Scholarship-Granting Organizations Under H.R. 833
Breaking Down the Controversies Surrounding H.R. 833
Maximizing Your Tax Savings with Educational Donations: A Taxpayer’s Guide
The Role of Scholarship-Granting Organizations: Rules, Requirements, and Responsibilities
Partnering with Scholarship-Granting Organizations: What Schools Need to Know
Supporting H.R. 833 can help create equal educational opportunities for all children, so let’s come together to back this vital change for families and communities.
What can you do to help get ECCA pass?
Contact your state’s congressional delegation to co-sponsor and pass the ECCA
