(WKYT) – A new federal tax credit program could soon help fund private-school scholarships for Kentucky students, but state officials are still working out how the program will be implemented.
Bluegrass Institute put together a FAQ page to help answer questions.
The Education Freedom Tax Credit, created under a provision of the federal “One Big Beautiful Bill Act” signed into law in July 2025, allows individual donors to claim a dollar-for-dollar federal tax credit of up to $1,700 per year for contributions to approved Scholarship Granting Organizations, or SGOs.
Married couples filing jointly could claim up to $3,400 per household, and unused credit can carry forward for up to five years.
Kentucky opted into the program through House Bill 1, which became law in March 2026 after the General Assembly overrode Gov. Andy Beshear’s veto.
Under the law, the Kentucky Secretary of State is responsible for establishing regulations, approving SGOs and reporting the state’s participation to the U.S. Treasury.
As of early July, SGO registration had not yet opened in Kentucky. The first list of approved SGOs is due to the federal government by Jan. 1, 2027, the date donations toward scholarships are expected to begin.
Under federal eligibility guidelines described in the FAQ, scholarships could go to students eligible to enroll in public school whose household income is at or below 300% of the area median income where they live.
Scholarship funds could be used for private-school tuition and fees and other education-related expenses, including books, tutoring, technology, internet access, uniforms and transportation.
Federal rules also set requirements for SGOs, including spending at least 90% of contributions on scholarships and serving students who attend more than one school, meaning most private schools would need to work with an approved SGO rather than operate as one themselves.