BIRMINGHAM, AL — The Alabama Policy Institute (API) has released a policy brief detailing how Alabama families and education providers can integrate the federal Education Freedom Tax Credit (EFTC) with existing state school choice initiatives. Following Alabama’s opt-in via Executive Order No. 742, the state is positioned to expand educational options ahead of the federal program’s official launch on January 1, 2027.
Enacted under the One Big Beautiful Bill Act on July 4, 2025, the EFTC program—statutorily designated as the Federal Tax Credit Scholarship (FTCS) program—allows individual taxpayers to claim up to $1,700 ($3,400 for married joint filers) annually in dollar-for-dollar federal tax credits for contributions to qualified Scholarship-Granting Organizations (SGOs).
Key takeaways from API’s implementation analysis include:
- Unprecedented Eligibility: Approximately 96% of Alabama K–12 students qualify for federal scholarship awards based on household income thresholds set at 300% Area Median Income (AMI).
- Seamless Program Stacking: Federal EFTC scholarships can be combined with Alabama CHOOSE Act Education Savings Accounts (ESAs) ($7,000 for public or private school; $2,000 for home education) and Alabama Accountability Act (AAA) scholarships to help cover remaining tuition and educational expenses.
- Tax Integrity Rules: Single donations cannot claim both a state and federal tax credit, preventing donor double-dipping while preserving credit incentives.
- Protection of Participation: Federal guidelines ensure states cannot impose restrictive rules on participating SGOs beyond standard statutory standards.
“The Education Freedom Tax Credit provides Alabama families with an unprecedented opportunity to customize their children’s education by combining federal and state choice resources,” said Stephanie Smith, President & CEO of the Alabama Policy Institute.
Alabama Policy Institute and Alabama Policy Action are active members of two national coalitions integral to the passage and implementation of the EFTC: the Invest in Education Coalition and the Federal Scholarship Tax Credit Coalition. API will continue to advocate for all parents to have the ability to choose the best educational options for their children.
https://alabamapolicy.org/
