Just a couple of miles up the road from our house on the north side of South Bend, Indiana, sits the Indiana-Michigan state border. Driving north into Michigan quickly trades cornfields for rolling hills and idyllic lakes, a truly beautiful part of the country.
It is close enough that our family often heads up to Niles, Michigan, to swim or play in basketball leagues with lots of great kids from this small town in southern Michigan. There is, however, one significant difference between living on the Indiana side of this line when it comes to education: here, we have school choice scholarships; there, they do not.
Currently, Indiana has three separate state educational choice programs: an education scholarship account program for students with disabilities, the Indiana choice scholarship program for private school students, and a smaller state tax credit scholarship program that often helps fill tuition gaps for families seeking another educational option.
Starting in January 2027, however, another striking difference may emerge across this Indiana-Michigan state line. As of July 2026, Indiana has opted in to the new Education Freedom Tax Credit (EFTC) and Michigan has not. As a result, my wife and I will have access to the expanded educational options in our state for our four children, but our friends and my son’s basketball teammates in Niles, less than a fifteen-minute drive away, will not.
This difference between Indiana and Michigan is just one of the contrasts at the center of a report I published this week with the American Federation for Children. It asks a question that sounds simple but turns out to be a bit more complicated upon further investigation:
How many K-12 children are eligible to receive scholarships under the new Education Freedom Tax Credit that launches January 1, 2027?
The credit, in two steps
The EFTC was created by Section 25F of the Internal Revenue Code, enacted in July 2025 as part of H.R. 1. It works in two steps. Donors who contribute up to $1,700 a year to a nonprofit Scholarship Granting Organization (SGO) receive a dollar-for-dollar federal tax credit for that contribution. Each SGO then awards scholarships to eligible students for qualifying K-12 expenses, including tuition, tutoring, books and supplies, educational technology, transportation, and therapies for students with special needs. Students in every type of educational setting are eligible, meaning public, charter, and private school students can all potentially qualify.
A student qualifies through two main tests: household income at or below 300% of the local Area Median Gross Income (AMGI), as published by the U.S. Department of Housing and Urban Development, and enrollment or eligibility to enroll in a public elementary or secondary school.
Nine in ten children clear the income test
Using data from the U.S. Census Bureau and other sources, I estimate the eligible population at 51.7 million children, or 91.7% of the 56.4 million children who are enrolled in or able to enroll in a K-12 school.
This makes EFTC eligibility available to nearly every family. In Maine, the state with the highest share, 96.2% of school-aged children qualify; even the District of Columbia, the lowest, still clears 85.9%. Three times the local median gross income works out to roughly $330,000 nationally for a family of four, ranging from a state average of about $234,000 in Mississippi to nearly $500,000 in the District of Columbia. Eligibility this broad was an intentional design feature of the law. The eligible share in every state exceeds 85%, and it stands at 90% or higher in 34 of the 50.
The number moves very little when you stress test the method or my assumptions. Holding every household to a flat four-person threshold instead of adjusting for family size lowers the national count by 334,144 children, or about 0.65%. Defining the K-12 population simply as all children ages five to 18 moves the eligible share from 91.7% to 91.9%.
Under every specification I tested, regardless of how you tweak the interpretation of the law, the answer lands between 91% and 92%. For the children missing out on this opportunity, the income test is clearly not the barrier. Two other barriers are.
The first gate: whether your state opts in
Scholarships can reach students only in states that participate, and participation is a choice each state makes. At the start of each calendar year, a state’s governor, or another official the state designates, must opt in for that tax year and submit its list of qualifying SGOs to the Treasury Department.
As of July 2026, 31 states have opted in or announced that they will. Those states are home to 30.9 million eligible children, 59.8% of the national total. The remaining 19 states and the District of Columbia account for the other 20.8 million, or 40.2%.
Of those 20.8 million children, 20.5 million live in one of the 18 states that currently have no state-level education savings account, voucher, or tax credit scholarship program at all. For them, the EFTC would be the first private school choice opportunity their state has ever had.
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The arithmetic here is driven by a handful of very large states. More than half of all eligible children live in just 10 states. Texas, Florida, New York, Ohio, Georgia, and North Carolina have opted in or signaled they will. California, Illinois, Pennsylvania, and Michigan have not yet decided. California alone accounts for 5.9 million eligible children, the largest eligible population of any state and more than the 22 smallest jurisdictions combined. Six other states that have not yet opted in each hold more than a million eligible students.
This map is not set in stone. States can choose to participate in any year, and so I anticipate the opt-in list may well grow into 2028 and beyond. But for the 2027 tax year, roughly four in ten eligible children live somewhere a scholarship cannot yet reach them.
The second gate: how your state defines a school
The second constraint is less visible and, to me, is a more interesting finding in the report.
Section 25F defines qualified expenses by reference to the Coverdell rules, which require that expenses be incurred in connection with enrollment at “a public, private, or religious school.” Section 530 then defines a school as one providing elementary or secondary education “as determined under State law.” In its June 2026 preview of forthcoming guidance, Treasury stated that “a home school would be treated as a school if it is treated as a school under State law.”
That single sentence hands the question to 51 different state laws, and they do not answer it the same way. In 22 states, state law likely makes homeschool students there eligible. In the other 28 states and the District of Columbia, they are likely excluded.
The scale of that distinction is larger than many might expect. Subtracting the estimated homeschooled children in those 29 jurisdictions who otherwise meet every income requirement removes 793,659 children from the eligible population. That pulls the national eligible share from 93.1% down to 91.7%. In Montana, the state with the largest such adjustment, it lowers the eligible share by nearly six percentage points.
Put plainly: close to 800,000 children are outside this credit not because their families earn too much, but because of how their state happens to categorize the way they learn.
The interpretation of this part of the EFTC law is genuinely unsettled. Homeschool advocates have asked Treasury to treat homeschool students as eligible regardless of how a state classifies them, and Treasury’s preliminary preview points the other way. Final rules are still to come, and they could resolve the question differently.
What these numbers can and cannot tell us
First, eligibility is not participation. This report describes who could receive a scholarship, not who will seek or receive one. Actual take-up will depend on state decisions, donor contributions, and how quickly SGOs build capacity. Philanthropists and operators will also rightly focus on directing resources where they’re needed most.
Second, the homeschool counts are the best-available estimates rather than administrative records. They come from the Household Pulse Survey, which has low response rates, and homeschooling families may respond at different rates than others. The state-level homeschool figures should be read cautiously as less precise survey estimates.
Finally, these estimates are based on current assumptions about the EFTC law itself which could change as the Department of Treasury finalizes rule making. I detail my reading of the eligibility criteria in the report.
Overall, these new estimates establish a baseline. Nearly every child in America clears the statutory income bar. The questions that will actually determine who receives a scholarship in 2027 are now sitting with governors, the Treasury, scholarship organizations like AFC Scholarship Fund, and the many generous donors it will take to make this policy a reality for millions of eligible children across the country.
The full report, Who Can Receive a Scholarship? The Eligible K-12 Student Population Under the New Federal Education Freedom Tax Credit, includes estimates for all 50 states and the District of Columbia.
Download the full report or download the two-page summary.
An estimated 51.7 million children, about 91.7% of the 56.4 million children enrolled in or eligible to enroll in a K-12 school, meet the income and enrollment criteria for a scholarship.
Yes. Each year, a state's governor, or another official the state designates, opts in and submits the state's list of qualifying SGOs to the Treasury Department. As of July 2026, 31 states have opted in or announced that they will. Students in the other 19 states and the District of Columbia are eligible on paper but cannot yet receive a scholarship until their state opts in.
It depends on the state. In 22 states, state law treats homeschooling as a form of private or religious school, so homeschool students there are likely eligible. In the other 28 states and the District of Columbia, current guidance suggests they likely are not, though Treasury's final regulations could change this.
Household income must be at or below 300% of the local Area Median Gross Income (AMGI), as published by HUD. That works out to roughly $330,000 nationally for a family of four, ranging from about $234,000 in Mississippi to nearly $500,000 in the District of Columbia.
