HYDE-SMITH BILL WOULD IMPROVE FEDERAL EDUCATION SCHOLARSHIP TAX CREDIT

HYDE-SMITH BILL WOULD IMPROVE FEDERAL EDUCATION SCHOLARSHIP TAX CREDIT

Legislation Aims to Encourage Additional Private Investment in Education Freedom Tax Credit

WASHINGTON, D.C. - U.S. Senator Cindy Hyde-Smith (R-Miss.) today announced she has introduced legislation to increase the impact of an existing federal education scholarship tax credit by indexing it to inflation and making it more attractive to private contributors to support K-12 educational needs.

The Federal Tax Credit Scholarship Improvement Act (S.5322) would adjust the Federal Scholarship Tax Credit (FSTC or Education Freedom Tax Credit) that allows individual taxpayers to claim a federal income tax credit of up to $1,700 a year to contributions to qualified elementary and secondary scholarship granting organizations. Hyde-Smith's bill would make it more attractive for couples filing joint tax returns to make contributions and index the tax credit for all such donations to the inflation rate.

"Mississippi is among the states committed to the concept of education freedom, which the federal tax credits were created to support. What we created in the Working Families Tax Cuts Act is a terrific idea, but I think we can tweak it to make it even stronger to benefit even more children," Hyde-Smith said. "My legislation will encourage additional private investment in scholarship-granting organizations, which will help expand educational opportunities without creating a new federal spending program."

S.5322, which has been referred to the Senate Finance Committee, would:

• Allow married couples filing a joint return to claim up to twice the individual tax credit for qualified elementary and secondary education scholarship contributions ($3,400 under current law). As written, a couple filing jointly may only claim $1,700.
• Index the individual credit amount for inflation beginning in tax year 2027, with annual adjustments published by the U.S. Department of the Treasury. This would preserve the long-term value of FSTC by indexing it for inflation.

Created in last year's Working Families Tax Cuts Act, the FSTC is intended to expand the ability of scholarship-granting organizations to support K-12 educational expenses, including private school tuition, public school supplemental costs, academic tutoring, special-needs services, internet access, software, and educational equipment. Contributors can begin claiming the tax credit beginning Jan. 1, 2027.

Mississippi is among 30 states that have opted to participate in this tax credit program.

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