A new federal tax credit launching Jan. 1, 2027, will let donors fund K-12 scholarships that Kenton County families could use for private school tuition and other costs.

The U.S. Department of the Treasury released proposed regulations Thursday, Oct. 1, detailing how the Federal Scholarship Tax Credit will work across at least 30 participating states. Kentucky is among them. WLWT first reported the details of the rollout.

Under the program, individual taxpayers can donate up to $1,700 to an approved scholarship-granting organization (SGO) and receive a dollar-for-dollar federal tax credit. Married couples filing jointly can claim up to $3,400. The donations fund scholarships for K-12 students whose household income falls at or below 300% of the area median income. Treasury officials estimate about 95% of American children live in households that meet the income threshold.

Scholarship money can pay for religious or private school tuition, books, computers, tutoring and special education therapies, according to Treasury officials. Public school students can also use the funds for extra learning expenses such as tutoring, though the administration had not specified eligible expense criteria as of Oct. 1.

The timeline for when families can actually apply for scholarships has not been announced. Jan. 1 is when donors can begin contributing to SGOs.

How Kentucky got here

Kentucky opted in through House Bill 1, sponsored by Rep. Kim Moser, R-Taylor Mill, and Rep. TJ Roberts, R-Burlington. Gov. Andy Beshear vetoed the bill. The House voted 77-14 on March 16 and the Senate 31-5 on March 17 to override the veto, mostly along party lines.

Rep. Kim Banta, R-Fort Mitchell, abstained on the House override vote. No public explanation for her abstention appears in available records.

Moser said during a Feb. 24 committee hearing that the tax credit would cost Kentucky taxpayers nothing while opening scholarship access through SGOs.

Secretary of State Michael Adams formally signed paperwork with the IRS to opt Kentucky in and approved state SGO procedures.

Who distributes the money

Eight organizations had declared intent to become Kentucky SGOs as of September, the Kentucky Lantern reported. They include the Catholic Education Foundation in Louisville, the newly formed Kentucky Education Fund, Special Education Lifeline in Greenup County and the Southeastern Kentucky Faith-Based Scholarship Fund.

SGOs must be 501(c)(3) nonprofits, spend at least 90% of their income on scholarships, serve at least 10 students across more than one school and verify household income, according to Treasury guidance. They must also prioritize returning scholarship recipients and their siblings.

The Kentucky Education Fund has partnered with the state's 15 Area Development Districts to establish the program in all 120 counties, Link NKY reported.

In a September Kentucky Lantern interview, Will Hodges, an adviser to the Kentucky Education Fund and former public school superintendent, said the fund aims to bring more money into Kentucky education broadly. "Most people are going to choose to send it to their local school," Hodges said.

What's still unknown

No Kentucky-specific family application portal or deadline has been announced. States must submit their final SGO lists to the IRS by Feb. 15, 2027. The public has 60 days from Oct. 1 to comment on the proposed federal regulations.

Whether NKY private schools such as Notre Dame Academy and St. Henry District High School are affiliated with any of the eight SGO applicants is not yet clear. The IRS and Treasury Department project the program will eventually direct nearly $26 billion into as many as 2.2 million scholarships nationally each year.