New York opts into the federal scholarship tax credit

New York will take part in the federal scholarship tax credit, Gov. Kathy Hochul announced on Friday, October 9. She is the second Democratic governor, after Colorado's Jared Polis, to opt a state in voluntarily, Chalkbeat reported. Newsday reported that New York joins at least 30 other states in the program, which Chalkbeat described as passing last year as part of the One Big Beautiful Bill Act.

For charities, the decision matters because the credit runs through them. Our earlier report explained that the new school scholarship credit runs through charities, known as scholarship-granting organizations, and that groups such as a Colorado scholarship charity planning to go national are preparing for it.

How the credit works

Starting January 1, Chalkbeat reported, individual taxpayers can donate up to $1,700 to a scholarship-granting organization and receive a dollar-for-dollar tax rebate from the federal government. The organizations then give the money to qualifying families for tuition or other education expenses. Anyone in any state can donate, but for students to benefit, their state's governor has to opt in each year and allow scholarship groups to operate there. Families earning up to 300% of area median income qualify.

Newsday described the scholarships as covering expenses from private school tuition to tutoring and school supplies, for students in elementary or secondary schools, whether public, private or charter.

What Hochul said

"After a careful review of the federal regulations, we believe this program has the potential to bring millions of additional dollars to New York students and families without taking a single dollar from public schools or our state or local budgets," Hochul said in a statement. "I'm not going to leave money on the table when it could help our kids."

Chalkbeat reported that Hochul had said earlier she wanted to see Treasury Department rules first, to make sure the program contained no "poison pill." The rules, it said, leave many questions unanswered but lay out ways public school students can benefit, particularly through tutoring.

The limits on the governor's role

According to Chalkbeat, Hochul will not be able to choose which groups can or cannot receive the funding, or prevent scholarship groups from discriminating on the basis of religion or LGBTQ status, and she cannot require scholarships to go only to students from low-income families. Thirty other states have opted in, per an IRS tracker Chalkbeat cited, including Kentucky, North Carolina and Kansas, where Republican legislatures overrode Democratic governors' vetoes.

Reaction

Supporters and opponents responded quickly. Michael Mulgrew, president of the United Federation of Teachers, said in a statement: "Giving up local control of public education to the federal government through the Trump administration's private school voucher scheme is a failure of leadership." Melinda Person, president of New York State United Teachers, called it "President Trump's private-school voucher program" and said the union intends to fight to repeal it at the federal level, Newsday reported.

Bishops of the New York State Catholic Conference thanked the governor in a letter Chalkbeat described. Steven F. Cheeseman, president of the National Catholic Educational Association, said in a statement quoted by Newsday: "By opting in, she is opening the door to new educational resources that can help children succeed, regardless of where they attend school."

Kenneth Bossert, president of the New York State Council of School Superintendents, called on the governor to commit state resources to help raise money for scholarship groups that support public schools, according to Newsday. Chalkbeat noted that how much the program can raise remains unclear.

What nonprofits should watch

For charities, the practical questions are about eligibility and timing: whether a group can register as a scholarship-granting organization in New York, how it will track and acknowledge gifts, and what its donors need to know about the credit. Our guide on what the 2026 deduction rules change for every donor covers the tax side of a gift in the year it is made.