New Bill Offers 75% Tax Credit on Charter School Donations, Capped at $5 Billion Annually Starting 2026

The 'High-Quality Charter Schools Act' is setting up a massive new federal incentive to fund charter school expansion, and it’s doing it through your tax dollars. Starting in the 2026 tax year, the bill creates a new federal tax credit (Section 25F) that allows individuals to claim 75 cents back for every dollar they donate to certain high-performing charter school organizations.

The 75% Off Coupon for Donors

This isn't a deduction—it’s a direct tax credit. If you donate $1,000, you reduce your tax bill by $750. However, this tax break is capped for the individual donor: you can’t claim more than $5,000 in credits per year, or 10% of your adjusted gross income, whichever is larger (SEC. 2). Crucially, the money has to go toward organizations that are expanding or creating new charter schools. If you’re a high-earner looking to support education, this is a huge financial win, as it effectively subsidizes three-quarters of your charitable contribution.

Who Gets the Money? (And Who Pays)

This isn't a free-for-all for every charter school. To receive these tax-advantaged donations, a charter school organization must be either a recipient of a federal expansion grant or, more notably, ranked in the top 10 percent for student performance among similar organizations in its state (SEC. 2). This aims to funnel significant private capital only toward schools that are already achieving high results. On the flip side, this credit isn't free money; it's a reduction in federal tax revenue, which is capped at $5 billion nationwide every year starting in 2026 (SEC. 4). That $5 billion is essentially a direct subsidy from the federal budget, meaning general taxpayers are footing the bill for this private expansion.

The First-Come, First-Served Race for Credits

Here’s where things get interesting for donors. The $5 billion national cap is enforced strictly on a first-come, first-served basis, determined by the date the donation was made (SEC. 4). The Treasury Secretary has to track this in real-time. If you’re a donor in a busy year, you better make your qualified contribution early, because if you wait too long and the cap is hit, your donation won't qualify for the credit—even if you’re otherwise eligible. This system favors sophisticated, well-advised donors who can act quickly at the start of the calendar year.

Spend It or Lose It: The Accountability Clause

The bill also puts the screws on the charter organizations receiving the funds, which is a key accountability measure. If they fail to spend the money fast enough, their donors lose the tax credit the following year (SEC. 3). The rule is this: they have until the first day of the fifth taxable year after receiving the contribution to spend it. For example, money received in 2026 must be spent by January 1, 2031. They are allowed to set aside up to 15% of the annual contribution to carry over to the next year, and up to 10% for administrative costs is automatically considered “reasonable” (SEC. 3). This tight deadline is designed to ensure the money actually gets used for expansion projects rather than sitting in endowments.

Autonomy Over Oversight

Finally, the bill includes a provision specifically stating that when participating, these charter schools cannot be treated as if they are working for the government, and they retain maximum freedom to decide what their students need (SEC. 5). While organizational autonomy is often a goal for charter schools, this explicit language might raise questions about oversight. When the government is essentially subsidizing 75% of the funding through a tax credit, the line between private autonomy and public accountability gets a little blurry.