Kentucky Lawmakers Seek Federal Tax Credits After Charter School Ruling
Following a Kentucky Supreme Court decision deeming state funding for charter schools unconstitutional, Republican lawmakers have introduced House Bill 1. This legislation aims to allow Kentucky residents to participate in the federal Education Freedom Tax Credit, offering a new avenue for educational opportunity.
What is the Education Freedom Tax Credit?
Established through HR 1 in 2025, the Education Freedom Tax Credit is a federal program offering a dollar-for-dollar tax credit of up to $1,700 for contributions to qualified scholarship granting organizations (SGOs). The program is set to initiate in the 2027 tax year, but states must actively opt-in to allow their residents to participate.
How HB 1 Would Work
House Bill 1 would enable Kentuckians to utilize this federal tax credit for donations made to Kentucky-based SGOs. These nonprofit organizations focus on providing scholarships to eligible K-12 students attending private schools, as well as those in public and home school settings. The funds can be used for a variety of educational opportunities.
A Response to the Court’s Decision
Reps. Kim Moser of Taylor Mill and T.J. Roberts of Burlington spearheaded the bill, stating it’s a commitment to expanding educational opportunities for Kentucky students. According to Rep. Moser, participation in the tax credit program ensures Kentucky students don’t miss out on scholarships available to students in other states.
National Trend: States Opting In
Kentucky is joining a growing number of states considering participation in the Education Freedom Tax Credit. As of January 27, 23 states have already opted in, including Virginia, Colorado, and New Hampshire.
What are Scholarship Granting Organizations?
SGOs are nonprofit organizations that receive contributions specifically for primary and secondary education scholarships. They play a crucial role in distributing funds to eligible students, supporting a range of educational choices.
Legislative Path Forward
House Bill 1 has been assigned to the House Appropriations and Revenue Committee for consideration. It is considered a top priority for House Republicans during the 2026 legislative session.
FAQ
- What is House Bill 1? House Bill 1 allows Kentucky residents to participate in the federal Education Freedom Tax Credit.
- How much is the federal tax credit? The credit is a dollar-for-dollar match of up to $1,700 for contributions to qualified SGOs.
- When does the federal program start? The Education Freedom Tax Credit begins in the 2027 tax year.
- What are SGOs? Scholarship Granting Organizations are nonprofits that provide scholarships for K-12 students.
Pro Tip: Donations to qualified SGOs are key to unlocking the benefits of the Education Freedom Tax Credit. Research and identify reputable organizations in Kentucky to maximize your impact.
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