Dunleavy approves first 20 groups for Alaska K-12 scholarships under new federal tax credit

Editor's note: This story was updated to clarify how the tax credit works and to correct Treasury's income-eligibility estimate.

Gov. Mike Dunleavy announced Friday, Oct. 2, the approval of Alaska's first 20 Scholarship Granting Organizations under the federal Education Freedom Tax Credit. The nonprofits can begin organizing scholarship programs and raising donations, though gifts won't qualify for the new credit until Jan. 1, 2027. The credit was created by the 2025 One Big Beautiful Bill Act for states that choose to join, and Dunleavy opted Alaska in on Jan. 26.

Here's how it works: people donate cash to approved scholarship organizations and can claim a federal income-tax credit for it, up to annual limits. The organizations use the donations to pay for scholarships for students.

An individual who makes a qualifying cash contribution may receive a dollar-for-dollar federal income-tax credit of up to $1,700 a year. The credit can reduce what a donor owes in federal income tax but won't produce a refund, and unused amounts can be carried forward for up to five years. Under rules Treasury proposed Oct. 1, a married couple filing jointly may receive up to $3,400 if each spouse gives up to $1,700. Gifts made before Jan. 1, 2027, do not qualify for the credit, the state said, though they may qualify for a charitable deduction. Taxpayers in any state may give to an approved Alaska organization, and to earn the credit, contributions must go to organizations on the IRS's 2027 list.

Scholarships may cover tuition, tutoring, books, classroom supplies, qualified K-12 career and technical education costs and services for students with disabilities. Students in public, charter, correspondence, private and religious schools may qualify. Students may be eligible if their household earns no more than 300 percent of their area's median income, and Treasury estimates that about 95 percent of American children live in households that meet that limit. Federal law requires each organization to spend at least 90 percent of its income on scholarships.

"I'm pleased to approve this first round of 20 organizations so that Alaskan students can benefit from scholarship opportunities as soon as possible," Dunleavy said.

Applicants came from Alaska and the Lower 48. The approved list includes Alaska Students First, Renew Scholarships Alaska, Friends of Spruce Tree Montessori, the American Catholic Education Fund and the Jewish Education Fund of America. Federal regulations released Oct. 1 would prevent participating states from excluding otherwise eligible organizations or limiting the types of schools scholarship recipients may attend.

The National Education Association and the American Federation of Teachers oppose the program, saying it would subsidize private education and undermine public schools.

Reviews continue on a rolling basis, and the state expects to send its final 2027 list to the IRS by Dec. 1.