Last verified: October 2026
Did Alabama opt into the federal scholarship tax credit?
Yes. Governor Kay Ivey signed Executive Order 742 on January 16, 2026, making Alabama a participant in the federal Education Freedom Tax Credit, the scholarship-granting-organization program created by the 2025 federal tax law. ALDOR runs the state's part.
Who will these scholarships serve in Jefferson and Shelby counties?
Students in households earning up to 300% of the area median income for their county or city, measured with HUD data. That reaches well past the 250% of poverty used by Accountability Act scholarships, so many middle-income Birmingham families who never qualified for an SGO award will be inside the new line.
Qualified expenses named by ALDOR include tuition and fees, tutoring, special-needs services and books, supplies and equipment, with more guidance expected. Treasury and the IRS issued proposed regulations on October 1, 2026.
Which organizations can award the money?
Only ALDOR-certified SGOs that are 501(c)(3) public charities, serve at least ten students at different schools, spend at least 90% of income on scholarships, do not earmark gifts for particular students, and serve only Alabama students. ALDOR had not published a certified list when we checked on October 28, 2026; we will add it when it appears.
Federal credit vs Alabama's own programs
| Federal Education Freedom Tax Credit | Alabama programs |
|---|---|
| Federal income tax credit for donors, starting 2027 | State tax credits (CHOOSE Act ESA, Accountability Act) |
| Income line: 300% of area median income | 300% of poverty (CHOOSE 2026-27) or 250% of poverty (SGOs) |
| Scholarship size set by each SGO | $7,000 / $2,000 ESA; up to $10,000 SGO award |