The Cost of Opting Out

This calculator projects charitable education donations that will not occur in states choosing not to opt into the Education Freedom Tax Credit. Beginning January 1, 2027, taxpayers in participating states may claim a nonrefundable federal credit of up to $1,700 for contributions to certified scholarship-granting organizations (SGOs). Participation is a state-level decision that is largely up to the governor. Residents of non-participating states are not eligible to direct those dollars to local students, though they may donate to SGOs operating in other states.

The projections are calculated separately for individual filers and joint filers, then combined for each state and year. "Individual filers" here covers both single filers and heads of household — any return filed by one person rather than a married couple. The formulas are straightforward:

• Individual filers (single and head of household): Number of filers with AGI ≥ $75,000 × $1,700 × participation rate
• Joint filers: Number of filers with AGI ≥ $75,000 × $3,400 × participation rate

The two filer types are modeled separately because pending Treasury guidance will determine whether married couples may each claim up to $1,700 (producing a $3,400 household total) or whether the credit is capped at $1,700 per return regardless of filing status. The tool defaults to $3,400 for joint filers. The Joint Filer Credit Cap toggle lets users apply the more conservative $1,700 assumption if they prefer.

Because the credit returns 100 cents on every dollar contributed, a full maximum contribution is assumed for every participating filer. Filer counts are restricted to returns with adjusted gross income of $75,000 or more — the threshold above which filers are most likely to carry enough tax liability to claim the full nonrefundable credit. These counts come from 2022 IRS Statistics of Income data and are held constant across the projection window. The model does not account for population growth or income increases, both of which would expand the eligible donor pool. Actual totals may be higher.

Baseline rates start at 10% for individual filers and 6% for joint filers in 2027, rising 2 percentage points per year through 2029. Joint filers are modeled at a lower participation rate despite their higher credit cap because not all filers may have $3,400 available to contribute upfront.

• Filer counts: IRS Statistics of Income, Historic Table 2 (2022) — state-level returns by filing status, adjusted gross income (AGI) ≥ $75,000
• EFTC statute: Education Freedom Tax Credit (IRC Section 25F), enacted as part of the One Big Beautiful Bill Act (P.L. 119-21, July 4, 2025)
• CARES Act participation data: IRS Statistics of Income, Publication 1304, Table 1.3 (Tax Year 2020) — 41.4 million standard-deduction filers claimed the above-the-line charitable deduction. Table 1.3: All Returns: Sources of Income, Adjustments, Deductions, Credits, and Tax Items, classified by Marital Status.