North Carolina taxpayers could give about $810 million a year to scholarship groups under the new federal Education Freedom Tax Credit if one in 10 eligible donors takes part, according to updated estimates from the American Federation for Children (AFC) Growth Fund.
The group’s September report put the same figure at $573 million, but that estimate counted each joint return as one donor. Based off proposed rules released Oct. 1 by the US Treasury Department that treats each spouse on a joint return as a separate taxpayer, AFC now estimates that a married couple can claim $3,400.
The credit was created in the 2025 federal tax law. A taxpayer who donates to a scholarship granting organization (SGO) can subtract up to $1,700 from federal income tax owed. The credit is nonrefundable, meaning only taxpayers who owe federal tax can claim it. Taxpayers can begin making donations Jan. 1, 2027.
AFC Growth Fund senior fellow Patrick Graff wrote the updated analysis. It counts 3,727,900 North Carolina tax filers who will owe federal income tax in 2027 and could claim the credit. If 20% of them donated, the state’s total would reach $1.6 billion a year.
Nationally, 50.5 million married couples filing jointly will owe federal income tax in 2027, according to the report, and 42.2 million of them owe at least $3,400 and could claim the full combined credit. Of all 121.5 million returns with a tax bill, 96.5 million owe enough to claim the full credit. Another 25 million could claim a credit up to the amount they owe.
Graff estimated that donors nationwide would give $26.3 billion a year at 10% participation. Treasury’s estimate, included with the rules, is that more than 11 million taxpayers will give nearly $26 billion a year by 2030. The AFC report says $26.3 billion would fund about 7 million scholarships averaging $3,500, or 3.5 million averaging $7,000, and that between 1 million and 2 million of those scholarships would come from letting both spouses claim the credit.
“Treasury’s extensive proposed rules resolve most of the remaining open questions about the Education Freedom Tax Credit,” Graff said in the release. “This new tax credit puts education philanthropy within reach of nearly every American taxpayer. A married couple can now give the full $3,400 annually for about $283 per month.”
The rules also allow taxpayers to donate through employer payroll deductions. Graff said that provision makes it easier for taxpayers to contribute “without reducing their monthly take-home pay.” The rules set the student income limit by family size rather than a flat four-person figure, which Graff estimates adds 500,000 eligible students in families of five or more.
“At 10 percent taxpayer participation, the removal of the marriage penalty alone could fund more than two million additional scholarships a year,” he said.
Only students in states that opt in can receive scholarships. North Carolina is one of 31 states the report lists as opted in or planning to. The other 20 jurisdictions have 20.8 million students who would qualify if their states joined. Treasury Secretary Scott Bessent said 30 states had opted in when the rules were released. Under the proposed rules, donors in states that have not opted in can still give to an SGO in a participating state.
AFC lobbies for school choice and runs a national scholarship granting organization, the AFC Scholarship Fund.
The report describes its participation rates as illustrative assumptions rather than predictions. The figures come from simulated 2027 tax returns built on IRS Statistics of Income data.
North Carolina opted in after the General Assembly overrode Gov. Josh Stein’s veto of House Bill 87 in June.
Under state law, the State Education Assistance Authority must adopt rules for the program within 120 days of the publication of the federal regulations. That deadline falls at the end of January. The authority updated its SGO page Oct. 7 to say it “will begin developing its guidance on the program in the upcoming weeks.” It has not posted an application process for scholarship groups. States must submit their SGO lists to the IRS by Feb. 15, 2027.