School Choice Win in Tax Bill Comes with a Catch: States Must Opt-In

While private school choice advocates, including Jewish organizations, are hailing a landmark victory with the inclusion of a federal tax credit scholarship program in the final “Big, Beautiful Bill” passed by Congress, a significant limitation remains – states need to opt in.

The program is optional, allowing individual states to decide whether to participate.

This opt-in provision marks a major retreat from the mandatory national program initially envisioned by House Republicans and means that for many families, particularly in Democratic-led states, the promise of federal aid for private and religious schooling may remain just out of reach.

The watered-down nature of the provision was a point of contention for some Republicans. Rep. Keith Self of Texas, who ultimately voted for the bill, lamented on X that the final version “leaves blue state students in failing schools with ‘optional’ school choice.”

The program works by granting a federal tax credit to individuals and corporations that donate to non-profit scholarship organizations. Those organizations then award funds to families to use for private school tuition, homeschooling expenses, and other educational costs.

Despite the limitations, the bill’s passage is being hailed as a historic moment by Orthodox Jewish community leaders, who have long advocated for such measures to address the high cost of Yeshiva tuition.

“This is unquestionably the single largest federal school choice program ever passed,” Nathan Diament, executive director of the Orthodox Union Advocacy Center, told Jewish Insider. “It’s going to be helpful to countless numbers of families.”

Agudath Israel of America called the proposal a “financial lifeline” that could “transform the tuition landscape.” The potential infusion of federally-incentivized scholarship money could dramatically lower tuition for thousands of families.

But for Yeshiva parents in states like New York, New Jersey, and California — which have large Orthodox populations but are politically controlled by Democrats — the victory is bittersweet. The benefits of the new federal program are entirely contingent on their state legislatures and governors choosing to opt in, a prospect that is far from certain.

“Any governor who would choose not to opt in would seem foolish,” said Rabbi A.D. Motzen of Agudath Israel. “This is all federal funds, it’s not taking away any money from the state. So not only are you leaving money on the table… you’re actually leading to money leaving the state.”

New Regulations and Fundraising Hurdles
Beyond the state opt-in clause, the final bill contains other key changes from the original, more aggressive House version.

Furthermore, a late change limited the amount a single donor can contribute to $1,700, a steep drop from the 10% of annual income proposed earlier. This will require scholarship organizations to identify a much larger number of donors to raise significant funds.

Still, for advocates who have fought for decades to get federal backing for school choice, the bill’s passage marks a watershed moment. Sen. Bill Cassidy of Louisiana, who sponsored the provision, called it a “major win” to have “the first ever federal school choice provision” enshrined into the nation’s tax code, vowing to “advocate for and pass improvements moving forward.”