Ask a military family how many schools their kids have attended, and sometimes it’s too many to count.
Every Permanent Change of Station (PCS) brings a new house, new neighbors and, for kids, a new classroom.
Look up scholarships for military children and you’ll find plenty of options but nearly all of them are for college. For the K-12 years, when moves hit kids the hardest, help has been much harder to find.
That’s starting to change. The Education Freedom Tax Credit (EFTC) is a new federal tax credit that funds K-12 scholarships through qualified Scholarship Granting Organizations (SGOs), like AFC Scholarship Fund, and it takes effect January 1, 2027.
Under Treasury’s proposed rules, military families can use the EFTC in a way most families can’t: their kids count as living in two states at once, which can keep scholarship eligibility intact through a move.
Most military scholarships start at 18. This one starts at 5.
The best-known military dependent scholarships, from Army dependent scholarships to awards for Navy, Air Force and Marine Corps families, help service members’ kids pay for college. Those scholarships do important work. But they skip the 13 years of school that come first, from kindergarten through senior year.
Those are the years when a move can mean leaving a school that finally clicked, starting over with new teachers, or landing somewhere with fewer options than the last duty station. For many families, the right school is out there. Cost is what stands in the way.
That’s the gap a new kind of scholarship for military children is built to fill: scholarships funded through the EFTC, designed for the K-12 years.
At AFC Scholarship Fund, that work has a name: the American Heroes Scholarship Fund. It supports military-connected K-12 students across every branch, including children of active-duty service members, National Guard and Reserve members, veterans and Gold Star families, through every transition, deployment and new school.
What Is the Education Freedom Tax Credit?
The EFTC is the first federal school choice tax credit created by Congress that will bring scholarships to states that opt in starting on January 1, 2027.
Here’s how it works: when eligible taxpayers make a charitable contribution to a qualified Scholarship Granting Organization (SGO), a nonprofit that connects private donations to education scholarships, they receive a dollar-for-dollar federal tax credit of up to $1,700, or up to $3,400 for married couples filing jointly, if each spouse gives up to $1,700. You donate first; the credit follows at filing and reduces your federal tax bill.
To be clear: this is a tax credit, not a deduction. A deduction only reduces your taxable income. A tax credit reduces your actual tax bill, dollar for dollar.
Scholarships funded through SGOs can cover a range of K-12 education expenses, ranging from tutoring for students in public schools to private school tuition, and most families qualify: about 90% of American students are eligible based on household income. Nationwide, the EFTC has the potential to unlock billions of dollars in new scholarship funding for children, including for military families.
The two-state rule for military families
Military families often have two states in their lives: the state they call home and the state where they’re stationed right now.
Treasury’s proposed rules recognize both. Under the proposed regulations, dependents of members of the Armed Forces are treated as living in their state of domicile and in the state where the service member currently lives.
In layman’s terms: your child counts as living in both your home state and the state where you’re stationed. If either one has opted in, your child can be eligible for a scholarship.
A family only misses out when neither state has opted in.
Be the First to Know
Get notified when the Education Freedom Tax Credit launches so you don’t miss the opportunity to support K–12 students while benefiting from a federal tax credit.
What this looks like after a move
Here are two examples.
Home state opted in, stationed somewhere that hasn’t.
An Army family calls Texas home, and Texas has opted in. Their orders take them to Washington State, which hadn’t opted in as of October 2026. Their son still counts as living in Texas, so an SGO serving Texas can award him a scholarship, even while the family lives in Washington.
Home state hasn’t opted in, stationed somewhere that has.
A Navy family’s home state is California, which hadn’t opted in as of October 2026. They’re stationed in Alabama, which has. Their daughter counts as living in Alabama, so she can receive a scholarship from an Alabama SGO.
Why this matters for families who move every few years
For most families, eligibility depends on a single state. Military families don’t always have that luxury.
The two-state rule changes that. Your home state stays constant even as your duty stations change, so if your home state has opted in, your child’s eligibility doesn’t hinge on where the next set of orders sends you. And if your home state hasn’t opted in, a new duty station in a participating state can open the door.
That stability matters. Military-connected children move an average of six to nine times between kindergarten and high school graduation, according to a study for the Military Child Education Coalition.
It doesn’t fix everything military kids face when they move. But it takes one big worry off the list.
What military families can do now
Scholarships funded through the credit start with the 2027 tax year, so now is a good time to get ready.
- Know your two states. Confirm your child’s state of domicile (often your state of legal residence) and the state where the service member currently lives. If you’re not sure which state is your legal home, your base legal office or tax advisor can help.
- Check your eligibility. Eligibility is based on household income, and most families qualify. Start here.
- Keep your paperwork handy. An SGO may ask you to show your child’s state of domicile and where the service member currently lives. Your orders and Leave and Earnings Statement are a good place to start.
- Talk to schools early. Applying for a scholarship is separate from applying to a school. Your installation’s school liaison officer can help you compare local options.
- Stay in the loop. Sign up for updates so you know when SGOs open applications.
For supporters: how your gift reaches military kids
Military families give a great deal to this country. The EFTC gives Americans a simple way to give something back, and the American Heroes Scholarship Fund puts that support to work for military kids.
Give $1,700 as an individual, or $3,400 as a married couple filing jointly ($1,700 from each spouse), and the credit covers the full gift for taxpayers who qualify. Give more and you get the same credit, with the rest treated like any other charitable contribution, subject to the usual tax rules. Think of the credit as a starting point, not a limit. Larger gifts help many more kids.
And because this is a federal tax credit, you can claim it no matter which state you live in. Learn more about giving to an SGO in another state.
Here’s how giving through the American Heroes Scholarship Fund works: you give to AFC Scholarship Fund, AFC Scholarship Fund awards scholarships to eligible military-connected students, and you claim your credit when you file. By federal law, an SGO must spend at least 90% of its income on scholarships, and AFC Scholarship Fund makes every award decision independently.
Giving opens January 1, 2027. Register your interest in the American Heroes Scholarship Fund and we’ll let you know the moment you can give.
Yes. Through the Education Freedom Tax Credit, military kids can be eligible for scholarships if they meet the income requirements and either their home state or the state where they're stationed has opted in.
If your home state has opted in, your child still counts as living there under the proposed rules, so an SGO serving your home state can award a scholarship.
Your child counts as living in the state where you're stationed, so an SGO serving that state can award a scholarship.
It's your child's state of domicile, the state your family considers its permanent legal home. For many families, that's the same as the service member's state of legal residence on the Leave and Earnings Statement. Your base legal office or tax advisor can confirm yours.
The two-state rule covers dependents of members of the Armed Forces. The proposed rules don't define who counts as a member, so whether it reaches National Guard and Reserve families isn't settled yet. The American Heroes Scholarship Fund serves military-connected students more broadly, including children of National Guard and Reserve members, veterans and Gold Star families, as long as they meet EFTC requirements for age, household income and state participation. If your situation is less typical, ask the SGO how the two-state rule applies to your family.
It's part of Treasury's proposed rules, so details could change before they're finalized. We'll update this article if they do.
Give through the American Heroes Scholarship Fund at AFC Scholarship Fund. Giving opens January 1, 2027, and you can register your interest now.
The credit takes effect January 1, 2027. Each SGO sets its own application timeline, so sign up for updates to hear when applications open.
