Education Freedom Tax Credit repeal is still a long shot after the midterms, and the §25F start on January 1, 2027 stands

The Education Freedom Tax Credit still starts on January 1, 2027, and the November 3 midterms didn't change that. Democrats won control of both the House and the Senate (NPR), which put repeal of the credit back in the conversation, but it's still a long shot. EdSource reported November 10 that President Trump would likely veto a bill ending the program and that Democrats won't have the votes to override him. The calendar settles the near term on its own: the new Congress is seated on January 3, two days after the credit begins, and none of the repeal bills filed this year has had a hearing or a vote.

What repeal would take. This year's repeal bills expire when the current Congress ends at noon on January 3, so any repeal starts over in the new one. A new bill would have to move through the tax-writing committees (Ways and Means in the House, Finance in the Senate), pass both chambers and be signed by President Trump, who signed §25F into law on July 4, 2025. The only way around him is a two-thirds vote in each chamber to override a veto. Republicans held the Senate 53 to 47 going into the election, and NPR counted seven Senate seats that flipped from Republican control. That gives Democrats the majority and leaves them far short of two-thirds.

Where the bills stand. The Senate bill is S. 4297, the Keep Public Funds in Public Schools Act, which Sen. Mark Kelly (D-AZ) introduced on April 15 (our first story on it). Congress.gov lists 35 cosponsors, none of them Republicans. It was referred to the Finance Committee the day it was introduced and hasn't moved since. The House version, H.R. 9289, introduced June 11 by Rep. Gwen Moore (D-WI), has more than 110 cosponsors, all Democrats, and has sat in Ways and Means since that day. EdSource expects support to grow once the newly elected Democrats take their seats. Both bills die on January 3 either way.

A priority, or not? Plenty of Democrats who gain power in January want the credit gone. Reps. Suzanne Bonamici, Bobby Scott and Jahana Hayes, the three Democrats Jewish Insider named in the race for the top Democratic seat on the House Education and Workforce Committee, all cosponsor H.R. 9289. Whether repeal makes the agenda is a separate question. Michael Petrilli, president of the Thomas B. Fordham Institute, which supports school choice, told EdSource: “Congressional Democrats will have to decide if this is enough of a priority when they are going to enter protracted negotiations with President Trump over so much else. I doubt that it will be.” More likely, he said, the program will “limp along as is.”

Reshape it rather than end it. Thomas Toch, founding director of FutureEd, an education policy institute at Georgetown University, expects the teachers unions and “their progressive allies” to press incoming Democrats to end the program, and he called that a political mistake. “There's strong parental support for more school choice, which is a major reason why Republicans nationwide have backed the policy,” he told EdSource. He'd rather Democrats reshape the credit “to put low-income students at the head of the scholarship line” and require schools, tutoring companies and other providers to show they're “moving the academic needle.” Petrilli would also like governors to be able to limit scholarships to poor and working-class families and to require participating schools to test scholarship students every year and report the results. Neither idea is in the law today. Under §25F, a student is eligible in a household at or below 300% of area median gross income, and the only priority the statute sets is for students who had a scholarship the year before, then their siblings.

The tax writers. Rep. Richard Neal of Massachusetts and Sen. Ron Wyden of Oregon, the top Democrats on Ways and Means and Finance, are in line to chair the two committees any repeal would go through. In an October 6 letter to Treasury Secretary Scott Bessent, they wrote that although they disagree with the policy behind the whole provision, “section 25F is duly enacted law.” The letter objected to one reading in Treasury's proposed rules, the $3,400 cap for married couples filing jointly, which they argue goes beyond what the statute allows, and asked Treasury for written answers. It didn't call for repeal. The $3,400 reading stays in the proposed rules, which taxpayers may rely on for 2027 contributions, until Treasury finalizes them.

The 2027 decisions are in the states. For next year, what matters is which states take part. Thirty-two are on our tracker: the IRS's list of 30 (as of October 22) plus New York and New Mexico, whose governors have decided to participate. A state that hasn't elected yet has to file its advance election, IRS Form 15714, by January 1, 2027, and every participating state's SGO list is due at the IRS by February 15 (the full calendar). Five governors who haven't decided, Maura Healey, Gavin Newsom, Ned Lamont, Gretchen Whitmer and Mikie Sherrill, asked Treasury for written answers on October 22. Newsom's office told EdSource it hasn't received a response, 19 days later. The state map shows where every state stands.

What happens next. Comments on Treasury's proposed §25F rules close December 1, and a public hearing is scheduled for December 15 (how to take part). January 1, 2027 is the day the credit starts and the deadline for a state's advance election. The new Congress is seated January 3, and every §25F bill from this Congress expires with it, including the bills that would remove the state opt-in from the other direction. A repeal push would start with a new bill after that. State SGO lists are due at the IRS by February 15. Our running page on who opposes §25F tracks the opposition.

For organizations. Nothing in the election changes what an SGO needs for a 2027 list. Each participating state's process, deadline and fees are on the apply pages, the approvals so far are on the official lists page, and the free SGO Builder covers the federal tests every list checks, among them the 90% test on the organization's income and scholarships for at least 10 students who don't all attend the same school. And if you want to put lower-income students first, the change Toch and Petrilli are asking Congress for, you don't have to wait: an SGO can set a lower income limit than the law's, and Treasury's proposed rules give the example of one limited to households at or below 50% of area median gross income.