New Charter School Bill Offers 75% Tax Credit on Donations, Capping Total Subsidy at $5 Billion Annually

This bill, the High-Quality Charter Schools Act, creates a massive new incentive for private donations to specific charter schools. Starting in 2026, it offers individual taxpayers a federal tax credit equal to 75 percent of the money or securities they donate to an “eligible charter school organization.” This credit is capped annually at the greater of $5,000 or 10% of your adjusted gross income (SEC. 2).

To qualify for this generous tax break, the receiving organization has to be either a charter school that has already received a federal expansion grant or one that ranks in the top 10 percent of charter schools in its state based on student performance. Essentially, this isn't funding for just any charter school; it’s a targeted subsidy for the high-fliers looking to expand (SEC. 2).

The $5 Billion Tax Credit Lottery

Here’s the catch that makes this less of a sure thing and more of a race: The total amount of these tax credits claimed nationwide is capped at $5 billion every single year, starting in 2026 (SEC. 4). This is a hard limit. The bill sets aside $10 million for every state first, and the rest goes into a national pool. Once the $5 billion is claimed, the benefit is gone for the year.

And how do they decide who gets the credit? It’s strictly first-come, first-served. The date you make the donation is your place in line, not the date you file your taxes. The Treasury Secretary is required to set up a system to track this volume in real time (SEC. 4). For busy, everyday people, this means that if you make a contribution late in the year, you might miss out on the 75% credit because the national cap has already been hit by earlier, potentially larger, donors. You’d still have donated the money, but you wouldn't get the huge tax break you were counting on.

Spend It or Lose It: Accountability for Schools

For the charter school organizations receiving this money, the bill introduces a strict spending clock. They must spend 100% of the qualified contributions they receive within five years of getting them (SEC. 3). For example, money received in 2026 must be spent by the start of 2031. They can carry over up to 15% to the next year, and they can subtract up to 10% for administrative costs.

If a school fails to spend the required amount in time, the penalty is direct: they lose the ability to receive new contributions that qualify for the tax credit for the entire following year (SEC. 3). This creates a strong incentive for these organizations to move quickly on expansion projects, construction, or curriculum development, rather than letting the money sit in accounts. This is a good guardrail against organizations stockpiling subsidized funds.

The Autonomy Clause and the Tax Loophole

One key provision emphasizes that a school’s participation in this program cannot be interpreted as making them a government entity, ensuring they retain maximum organizational and parental autonomy (SEC. 5). This means schools get the benefit of the federal tax subsidy—a huge influx of private cash—without the typical strings or oversight that often come with federal funding.

Finally, a note for anyone considering this tax break: you cannot double-dip. If you claim the 75% credit under this new law, you cannot also claim that same donation as a regular charitable deduction on your income taxes (SEC. 2). It’s an either/or situation, but given that the new credit is 75%, most donors will likely opt for this new, more lucrative option.