OKLAHOMA CITY – A law allowing Oklahomans to receive a federal income tax credit beginning next year for qualified cash contributions to scholarship-granting organizations (SGOs) takes effect Nov. 1.

Oklahoma is one of 30 states that have opted into participating in the Federal Scholarship Tax Credit (FSTC) program starting with the 2027 tax year. The program allows contributions to be claimed on the 2027 federal income tax returns filed in 2028. The Oklahoma Tax Commission currently is receiving applications from eligible SGOs through Dec. 15. Funding from contributions, which can be made beginning Jan. 1, is to be used for scholarships for elementary and secondary education expenses. Funds can be donated to benefit both public and private school students. 

Rep. Denise Crosswhite Hader, R-Piedmont authored House Bill 3704.

"We want every child in our state to receive the very best education available to them," Crosswhite Hader said. "This improves not only the child's life but all of society, as a better educated child is healthier and more prepared for their future, including their roles in their families, communities and the workforce."

Crosswhite Hader said the local public school is the best option for many students, but parents should have the freedom to decide if another option is the best fit for their child. 

"Taxpayers also should be able to support these choices with their own tax dollars," she said.

The federal program is similar to the Oklahoma Equal Opportunity Education Scholarship program. Both allow Oklahoma taxpayers to contribute to a qualifying SGO and claim the amount of the contribution as a tax credit; however, the federal credit will be reduced by the amount allowed as a state tax credit for qualified contributions made during the same taxable year. The contributions then support scholarship efforts for Oklahoma students, including educational expenses such as tutoring or academic materials.  

Gov. Kevin Stitt previously signed an executive order opting Oklahoma into the FSTC program. Crosswhite Hader said this legislation puts this action in statute so going forward this will be available to all willing taxpayer participants.

The tax credit is part of the federal One Big Beautiful Bill Act signed into law last year by President Trump.

HB3704 designates the Oklahoma Tax Commission (OTC) as the administering agency for the program in the state.

According to the Opportunity Scholarship Fund (OSF), here is how the program will work in Oklahoma.

Beginning Jan. 1, an individual who gives cash to an approved SGO can get a federal tax credit of up to $1,700. Businesses cannot receive the credit, but proposed rules may allow up to $3,400 for a married couple who each give to a state-approved, federally recognized nonprofit that distribute private-school scholarships to eligible children. These are defined as students from households earning no more than 300% of their county’s median income.

Under HB3704, the OTC is required to identify and register eligible SGOs, maintain and submit their list to the U.S. Treasury, develop rules, forms and procedures to administer the list, and ensure compliance with federal guidelines, including contribution reporting and scholarship distribution.

According to OSF, no Oklahoma SGO is approved yet. The OTC must send Oklahoma's first list to the IRS by Feb. 15, 2027.

SGOs can apply to participate in both the state and federal scholarship tax credit programs on the Oklahoma Tax Commission's website: https://oklahoma.gov/tax/individuals/scholarship-granting-organizations.html. This site also includes answers to frequently asked questions and additional information for taxpayers and SGO applicants.

The Oklahoma Council on Public Affairs previously reported the tax credit could generate an additional $24 billion in education funding annually nationwide. Every $1 billion in scholarships could fund tuition at a school of choice for 77,000 students or cover tutoring for more than 300,000 students.

Crosswhite Hader said she wanted to particularly thank Rep. Chad Caldwell, R-Enid, for bringing this program to her attention. Caldwell is term limited after 12 years of service in the Oklahoma House of Representatives, but he has been an enormous proponent of school choice for students and parents during his time in office.

"This legislation would not have happened without his assistance and direction," Crosswhite Hader said.