Trump Administration Urges New Jersey to Join New Federal Education Tax Credit Program

ATLANTIC CITY — The Trump administration is publicly urging New Jersey to join a new federal education tax-credit program that could help families pay for private-school tuition, tutoring and other K-12 educational expenses beginning next year.

But so far, New Jersey has not signed on.

“Thirty states, both red and blue, have opted in,” U.S. Department of Education Chief Spokesperson Julie Hartman said Friday during an appearance on The Don Williams Show on WOND (M-F, 6-10AM). “We need New Jersey to opt in.”

“They still have time before the end of the year,” Hartman said.

A South Jersey NewsBeat review of federal records confirms that New Jersey is not currently among the states participating in the program.

As of July 24, the Internal Revenue Service listed 30 states that have made an advance election to participate in the Federal Scholarship Tax Credit for 2027. New Jersey is not on the list.

The decision ultimately presents Gov. Mikie Sherrill and state lawmakers with a potentially consequential education-policy choice: participate in a program the Trump administration describes as an expansion of educational freedom, or remain outside a system critics may view as another means of steering resources toward private education.

How the program works

The Education Freedom Tax Credit — formally called the Federal Scholarship Tax Credit by the IRS — was created as part of the federal tax-and-spending law signed by President Donald Trump in July 2025.

It takes effect Jan. 1, 2027.

But the program does not work by having the federal government simply send families $1,700 for education expenses.

Instead, taxpayers can make cash contributions to qualifying nonprofit Scholarship Granting Organizations, or SGOs. A taxpayer may then receive a nonrefundable federal income-tax credit of up to $1,700 for qualifying contributions.

The scholarship organizations use those contributions to provide assistance to eligible K-12 students.

That money can be used for more than private-school tuition.

The U.S. Department of Education says qualifying expenses can include tutoring for students attending public schools and services for students with disabilities, in addition to scholarships for private education.

Hartman emphasized that distinction during Friday's interview.

“What this allows parents to do starting in 2027 is choose the best education intervention for their child's needs, whether their child attends public or private school,” Hartman said.

“They can use funds for a scholarship to a private school,” she said. “But here's the great part. They could also use funds to remain in their existing public school and obtain after-school programs or tutoring programs.”

New Jersey has to opt in

There's a catch.

For New Jersey-based scholarship organizations to participate, the state must elect to join the federal program and submit a list of qualifying organizations to the IRS.

Participation is voluntary.

The IRS says states participating in 2027 must provide the federal government with a list of qualifying scholarship organizations by Jan. 1, 2027, or “as early as practicable.”

New Jersey hasn't done that.

Gov. Sherrill's office said in May that she had not yet made a decision.

“Governor Sherrill will evaluate the program once the Trump Administration has finalized and published its rules,” Sherrill deputy press secretary Maggie Garbarino told Jewish Insider.

Garbarino added that the governor's “top priority is building New Jersey into the best public school system in the nation for all our kids.”

That is significant because some of the final rules still aren't available.

The U.S. Treasury Department said in June that it expects to issue proposed regulations by the end of September, with states, scholarship organizations and taxpayers expected to be able to rely on those rules for the program's 2027 launch.

New Jersey lawmakers have introduced a bill

Sherrill isn't the only person who could have a say in what happens.

Legislation has already been introduced in Trenton that would require New Jersey to participate.

Assembly Bill A4777, introduced March 19, would require the state to elect into the federal program and direct the New Jersey education commissioner to provide the information required by the federal government each year.

The bill is sponsored by Republican Assembly members Michael Inganamort, Gerry Scharfenberger, Dawn Fantasia, Victoria Flynn and John Azzariti Jr.

It was referred to the Assembly Education Committee and has not advanced beyond the committee stage, according to legislative records. A companion bill, S4121, was subsequently introduced in the Senate.

The legislation says scholarships would be available for students from households with incomes no greater than 300% of the area's median gross income, reflecting the income limitation contained in the federal program.

Does it take money from public schools?

Hartman also addressed what is likely to become one of the central political arguments surrounding the program.

“It doesn't take a single dollar away from public schools,” Hartman said. “It doesn't cost taxpayers a dime.”

“It infuses additional education funding into the system so parents can choose the best education for their child,” she said.

The first part of Hartman's statement requires some context.

The program does not directly reduce state or local appropriations to New Jersey public schools. It is funded through a new federal income-tax credit for taxpayers who make qualifying donations to scholarship organizations.

But describing it as costing taxpayers nothing is an administration characterization rather than a literal description of the federal tax treatment.

A tax credit reduces federal tax liability. In this case, an eligible taxpayer can receive a dollar-for-dollar credit of up to $1,700 for qualifying donations. The Congressional Research Service describes tax-credit scholarship programs as reducing a taxpayer's tax liability in exchange for donations to scholarship organizations.

So while the program does not take an existing appropriation out of a New Jersey public-school district's budget, the federal government is providing a tax expenditure to encourage private donations.

Public-school families could participate

The private-school component is likely to attract much of the political attention, but the federal law is broader.

According to the Education Department, scholarships can cover qualified expenses connected with public, private and charter schools.

That can include private-school tuition but also tutoring, educational services and support for students with disabilities.

Eligibility isn't unlimited.

The New Jersey legislation describing the federal program says scholarships are intended for students whose household income does not exceed 300% of the area median gross income.

The precise amount an individual family might receive also shouldn't be confused with the $1,700 tax-credit figure.

The $1,700 is the maximum federal tax credit available to a taxpayer making a qualifying donation. It is not necessarily the amount of a scholarship that an individual student would receive. Scholarship amounts would be determined through participating SGOs under federal requirements and forthcoming regulations.

30 states have already signed on

The program has expanded quickly during 2026.

The Education Department reported 23 participating states in January. The IRS reported 27 by early June.

By July 24, the official IRS list had grown to 30 states:

Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.

New Jersey remains outside the program.

Hartman made clear Friday that the Trump administration wants that to change.

“We need New Jersey to opt in,” she said.

The decision doesn't necessarily have to be made before Treasury finishes writing the rules.

But with the program scheduled to begin Jan. 1, New Jersey will soon have to determine whether it wants its own scholarship organizations participating when the nation's first federal K-12 scholarship tax credit gets underway.