Who can receive a scholarship under the federal credit, and what can it pay for?

Question

Accepted Answer

A student qualifies if two things are true. The student must be eligible to enrol in a public elementary or secondary school, which in practice means a K-12 student in a state that has chosen to participate in the programme. And the student's household income must be no more than 300 percent of the median gross income for their area. That income ceiling is high enough that Treasury estimates the large majority of American children fall under it.

Scholarships pay for qualified elementary and secondary education expenses. In practice that centres on tuition and fees at a school, and reaches tutoring, books and supplies, special needs services, educational technology and transportation. The scholarship itself is not taxable income to your family: a companion provision, section 139K of the tax code, excludes it from gross income.

Two protections are built into the law. An SGO must award scholarships to at least ten students who do not all attend the same school, and no donor can earmark a gift for one particular named student, including their own child. Families apply to the SGO for a scholarship; donors fund the pool. SGOs must also give priority to students renewing a scholarship from the year before, and then to their siblings.