A New Opportunity Is Coming to Alabama. Do Families Know About It?
A new education tax credit is coming to Alabama in 2027, creating another potential source of scholarship funding for families and new opportunities for donors to support students.
But there is an important question that has less to do with tax policy and more to do with communication: Will families know about it?
New polling from EdChoice and Morning Consult suggests there is work to do. According to the survey, 40% of adults said they had not heard about the new federal education tax credit at all, while another 17% said they had heard only a little. K-12 parents were more familiar with the program, but about one-quarter still said they had not heard anything about it.
That matters because an opportunity families do not know about is an opportunity they cannot use.
For Alabama, where school choice has expanded significantly in recent years, awareness will be especially important as families navigate multiple programs and determine what options may be available to them.
Alabama’s School Choice Landscape Is Growing
Alabama families already have more educational options than they did a decade ago.
The Alabama Accountability Act (AAA) Scholarship Program has provided scholarships to eligible students since 2013, helping families access educational opportunities beyond their assigned public school. The CHOOSE Act, Alabama’s education savings account program, added another option, allowing eligible families to use state funds for approved educational expenses, including private school tuition, homeschooling resources and other services.
Now, the federal Education Freedom Tax Credit (EFTC) will add another layer.
Beginning January 1, 2027, eligible taxpayers will be able to contribute to qualified Scholarship Granting Organizations (SGOs) and receive a federal tax credit of up to $1,700 and married couples can each contribute and claim the credit, for a combined benefit of up to $3,400.for those contributions. Alabama is among the states that have elected to participate in the program for 2027.
For families, that means another potential source of scholarship support. For schools, it means another potential source of funding to help make enrollment more accessible. For donors, it creates a new way to direct federal tax dollars toward scholarships that support students.
What Does the Education Freedom Tax Credit Mean for Alabama Families?
The EFTC is designed to work alongside Alabama’s existing school choice programs rather than replace them.
One important distinction is how eligibility is determined. EFTC scholarship eligibility is based on household income compared with the area median income, with the federal law setting the threshold at 300% of area median income. Because area median income varies by location, the income threshold will differ across Alabama.
That means some families who do not qualify for another scholarship program may qualify for an EFTC-funded scholarship.
Scholarship funds can support qualified educational expenses, including private school tuition and certain supplemental educational services. The program could also provide additional flexibility for families whose children need tutoring, specialized instruction, therapies or other educational supports.
Importantly, EFTC scholarships can stack on top of other school choice funds. A family receiving an AAA scholarship or CHOOSE Act funds may also be eligible to receive an EFTC scholarship. Rather than replacing those existing sources of support, an EFTC scholarship can provide additional funding to help a family cover qualified educational expenses.
That means a family could potentially use an AAA scholarship or CHOOSE Act funds alongside an EFTC scholarship, depending on the family's eligibility and the specific educational expenses involved.
This additional layer of support could make a meaningful difference for families weighing the cost of different educational options.
What Does It Mean for Donors?
The EFTC creates a new way for eligible taxpayers to support scholarship opportunities.
Beginning in 2027, taxpayers may contribute up to $1,700 to a qualified SGO and receive a dollar-for-dollar federal tax credit for that contribution. Married couples can each contribute and claim the credit, for a combined benefit of up to $3,400. Unlike a deduction, a tax credit directly reduces federal tax liability. The IRS describes the EFTC as a nonrefundable credit.
Unlike the AAA Tax Credit Program, donors can also direct contributions to participating schools, although they cannot earmark a scholarship for a particular student.
For Alabama schools, this could mean another source of scholarship funding and another way for members of a community to invest in the students and schools they care about.
Awareness Is the Next Step
The mechanics of a new federal program are important. So are the regulations that are still being finalized.
But there is another piece of implementation that cannot be overlooked: making sure people know the opportunity exists.
The EdChoice/Morning Consult polling is a useful reminder. Even as the federal program moves closer to launch, many Americans have never heard of it. Among those who have heard of it, many have only heard a little.
For Alabama families, that information gap could matter.
School choice can already be difficult to navigate. Families may hear about the AAA Scholarship Program, the CHOOSE Act, private school scholarships, homeschooling resources and now the EFTC without knowing how those programs differ, who qualifies or whether they can be combined.
Clear information can help families understand their options and make decisions based on what works for their children.
That is why awareness needs to start before the program goes live on January 1, 2027. Our team will continue sharing information about the EFTC as additional guidance becomes available and helping Alabama families, schools and donors understand what this new opportunity could mean for them.
