Alabama Expands School Choice with Federal Tax Credit Program

Governor Kay Ivey signed Executive Order No. 742 in January 2026, authorizing Alabama's participation in the Federal Education Freedom Tax Credit program created by President Donald Trump's One Big Beautiful Bill Act last July. The executive order directs the Alabama Department of Revenue to administer the program and certify eligible scholarship granting organizations, building on infrastructure already established through the state's existing Alabama Accountability Act.

The CHOOSE Act, which Ivey championed and signed into law on March 7, 2024, created a $100 million fund providing refundable income tax credits of up to $7,000 per child for families not enrolling their children in public schools. The program makes education savings accounts (ESAs) available to support every K-12 student in Alabama, with funds usable for tuition, textbooks, after-school programs, and other qualified educational expenses at approved providers. For the 2025-2026 academic year, the first 500 credits are reserved for students with special needs, followed by dependents of active-duty service members enrolled in priority schools, with remaining credits awarded based on family income as a percentage of the federal poverty level.

The federal tax credit program operates similarly to the state's existing programs, offering federal tax credits for contributions to approved scholarship organizations that provide scholarships to elementary and secondary students. Scholarship funds can cover tuition, books, fees, supplies, tutoring, and special needs services at public, private, and religious schools. Eligible participants in both the CHOOSE Act and Alabama Accountability Act programs may qualify for the federal program, creating multiple pathways for families to access educational alternatives.

Alabama's expansion of school choice reflects a broader national trend, positioning the state among an elite group of 11 states offering universal school choice to every child. The legislature has appropriated at least $100 million annually to fund the education savings accounts, with an additional $1 million appropriation to the Department of Revenue for program administration. Education policy advocates argue the program expands opportunities for students and families while providing taxpayers additional means to support education across the state.