The "Universal School Choice Act" introduces new federal tax credits designed to incentivize charitable contributions to organizations that provide K-12 education scholarships. Under this bill, both individuals and corporations can claim a credit against their federal taxes for donations made to eligible scholarship granting organizations (SGOs). The primary goal is to expand educational opportunities and choices for elementary and secondary students across various schooling options.

A scholarship granting organization must be a 501(c)(3) non-private foundation, with substantially all its activities focused on providing scholarships for qualified education expenses. These expenses are broadly defined to include tuition, books, curricula, online educational materials, tutoring by qualified instructors, standardized test fees, dual enrollment fees, and educational therapies for students with disabilities. Importantly, the bill also covers expenses for students attending public, private, or home schools, ensuring flexibility in educational settings.

For individuals, the credit is capped at the greater of 10 percent of their adjusted gross income or $5,000, while corporations can claim a credit up to 5 percent of their taxable income. A national volume cap of $10 billion is established for these credits, allocated among states with priority for low-income students. SGOs are required to prioritize scholarships for returning students, siblings, and students from households with incomes below 500 percent of the poverty line, and must undergo annual financial audits to ensure accountability.

Furthermore, the bill specifies that scholarship amounts received by eligible students are exempt from gross income, preventing them from being taxed. It also includes provisions to prevent federal, state, or local governmental entities from controlling or discriminating against SGOs or non-public schools, including religious institutions, that participate in the program. The amendments made by this Act will apply to taxable years ending after December 31, 2025.