The RAISE Act of 2025 (S.1697) creates a new federal refundable tax credit for K–12 teachers and early childhood educators as a federal supplement to state and local pay efforts. It also raises the above‑the‑line deduction for educator classroom expenses, requires federal data sharing to administer school‑level targeting, and adds a dedicated funding stream inside the Elementary and Secondary Education Act for local agencies that maintain or increase teacher salaries.
The bill aims to shift some federal policy toward directly improving educators’ take‑home pay and career supports while building guardrails to prevent states, local agencies, or employers from offsetting those federal supports. The result is a mix of tax‑code subsidies, programmatic grants, reporting mandates, and labor protections that will create new compliance touchpoints for schools, state education agencies, and early childhood providers.
At a Glance
What It Does
Amends the Internal Revenue Code to add section 36C, a refundable Teacher Tax Credit, and raises the educator expense deduction. It directs the Department of Education to supply school‑level poverty data to Treasury and creates a reserved Title I funding stream for districts that maintain or increase teacher pay.
Who It Affects
Public K–12 teachers who meet state certification and work at least 75% of full‑time hours, early childhood educators meeting credential and hours tests, local and state education agencies, early childhood program funders, and employers engaged in collective bargaining with eligible educators.
Why It Matters
This law ties a federal, refundable cash subsidy to school‑level poverty and adds programmatic incentives to reward districts that keep or raise teacher pay, changing how federal policy complements (and monitors) state and local compensation systems and creating new reporting and enforcement duties for education agencies.
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What This Bill Actually Does
The bill establishes a refundable teacher tax credit available to individuals who meet the bill’s definition of an eligible educator — either a certified K–12 teacher of record working the equivalent of at least 75% of a full‑time school year, or an early childhood educator who meets credential and hours thresholds. The credit has a $1,000 base amount and an extra, school‑targeted component whose size depends on the school’s student poverty ratio; the bill sets formula mechanics, an upper bound that differs for early childhood educators without a bachelor’s degree, and an annual inflation adjustment.
To identify which schools qualify and to calculate the targeted portion of the credit, the Department of Education must collect and share school‑level poverty and eligibility data with the Treasury Department. The bill defines qualifying schools by reference to Part A of Title I, Bureau of Indian Education funding, or certain federally supported early childhood programs, and adopts the same poverty measures used in Title I allocations.The legislation prevents state educational agencies, local educational agencies, and entities that fund or regulate early childhood programs from reducing teacher pay or loan‑forgiveness programs because teachers are eligible for the federal credit; agencies must be able to demonstrate, on request, that they did not reallocate funds in response to the credit.
It also bars employers from using the credit in collective bargaining calculations or from reassigning teachers primarily to avoid or reduce credit eligibility, and it gives the Federal Labor Relations Authority authority to investigate such employer actions.Separately, the bill increases the above‑the‑line deduction for qualifying elementary and secondary school teachers from the prior level to $500 and extends that deduction to qualifying early childhood educators who meet an hours threshold. Finally, it amends the Elementary and Secondary Education Act to appropriate a baseline increase in Title I funding and to reserve a teacher salary incentive portion (calculated as a percentage of funds above a statutory floor) that awards grants to local agencies that maintained or increased teacher salary schedules; those grants may be used for preparation, certification supports, mentoring, professional development, and other activities aimed at strengthening the educator workforce.
The Five Things You Need to Know
The bill creates a refundable federal Teacher Tax Credit that provides a $1,000 base payment to eligible educators and an additional school‑targeted amount determined by a student poverty ratio formula.
The targeted portion is scaled so its maximum equals $14,000 (or $9,000 for early childhood educators without a bachelor’s degree) and is computed by comparing a qualifying school’s poverty percentage to a 39% threshold across a 36‑percentage‑point range.
An eligible elementary/secondary teacher must be the teacher of record providing direct classroom instruction for at least 75% of a full‑time school year, hold applicable State certification/licensure, and have at least one year meeting these requirements prior to the taxable year.
The Department of Education must collect and provide school‑level poverty and eligibility data to Treasury, and State/Local education agencies and early childhood funders are prohibited from reducing teacher pay or loan‑forgiveness programs because of the credit (they must demonstrate compliance on request).
The bill raises Title I appropriations (a $5.2 billion baseline for FY2026) and creates a teacher salary incentive reservation equal to 20% of funds above a $2.2 billion floor to award grants to districts that maintained or increased teacher salary schedules.
Section-by-Section Breakdown
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Creates the refundable Teacher Tax Credit
This section inserts new Internal Revenue Code section 36C. It authorizes the refundable credit for any individual who is an eligible educator during school years ending in or within the taxable year, sets a $1,000 base amount, and adds a school‑targeted additional amount tied to a student poverty ratio. It includes an inflation adjustment for dollar amounts beginning after 2026 and makes conforming tax‑code and Treasury provisions to recognize the new credit.
Defines eligible elementary/secondary and early childhood educators
The bill defines an elementary or secondary teacher as the teacher of record providing direct classroom (or classroom‑type) teaching for at least 75% of full‑time hours, holding state certification/licensure, and with at least one year of meeting those conditions. Early childhood educators must hold a CDA (or equivalent) or an associate’s degree or higher, meet state permitting or licensing, have primary responsibility for child learning in a qualifying early childhood program for at least 75% of full‑time hours (as set by HHS), and have at least one year of prior qualification. Those concrete thresholds drive both who can claim the refundable credit and who can use the expanded educator expense deduction.
Targets the credit to Title I, BIE, and federally funded early childhood sites and specifies poverty measures
A qualifying school is principally a Title I eligible public elementary/secondary school, a Bureau of Indian Education school, or an early childhood program aligned to CCDBG or the child and adult care food program. For Title I schools the bill uses the same poverty metric that determines Title I allocations; for early childhood programs it uses program eligibility for CCDBG or CACFP to compute a student poverty ratio. The targeted amount’s formula measures how far a school’s poverty percentage exceeds 39% and scales the supplemental credit proportionally across a 36‑percentage‑point band.
Mandates DOE→Treasury data sharing and forbids offsetting state/local reductions
The Department of Education must collect school‑level information needed to determine qualifying status and the credit amount and provide that data to Treasury. The bill conditions continued federal funding on schools’ cooperation with DOE data requests. Importantly, state educational agencies, local educational agencies, and entities that fund or regulate early childhood programs may not reduce teacher pay or loan‑forgiveness in response to the federal credit; they must demonstrate the allocation methodology to Treasury upon request, creating an audit trail to enforce the supplement‑not‑supplant policy.
Prohibits employers from using the credit in bargaining or reassignment to avoid payments
Employers who engage in collective bargaining cannot factor the teacher tax credit into salary or compensation calculations, and employers may not reassign or change a teacher’s work location if the primary reason is to prevent or reduce a teacher’s credit. The Federal Labor Relations Authority is expressly given investigatory and enforcement authority to address violations (using unfair labor practice procedures), tying federal labor process to enforcement of the credit’s protections.
Expands educator deduction and creates mandatory Title I teacher salary incentive funds
Section 3 raises the above‑the‑line educator expense deduction from the older statutory level to $500 and explicitly extends that deduction to qualifying early childhood educators who work at least 1,020 hours per year. Section 4 replaces an authorization language in ESEA §2003 with mandatory appropriations, sets a $5.2 billion baseline for FY2026 (with CPI increases thereafter), and establishes a reservation (20% of amounts above $2.2 billion) to fund teacher salary incentive grants. The grant uses a Title I child count‑based allotment to reward districts that maintained or increased salary schedules and restricts grant funds to defined professional supports and pay‑related capacity building, subject to a supplement‑not‑supplant rule.
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Explore Education in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- High‑poverty school teachers: Teachers at schools with higher student poverty ratios receive larger supplemental payments, directly increasing take‑home income for educators serving disadvantaged communities.
- Early childhood educators who meet credential and hours tests: The bill extends eligibility and the expanded educator expense deduction to early childhood professionals, delivering direct cash via the refundable credit and tax relief for classroom expenses.
- Local educational agencies that maintained or increased salary schedules: These districts become eligible for teacher salary incentive grants under the reserved Title I funds, providing additional programmatic support for preparation, certification, mentoring, and professional development.
- New‑and‑midcareer teachers in Title I settings: The mix of refundable credits, mentoring/induction grant eligibility, and professional development resources aims to improve recruitment and retention in high‑need schools, benefiting teachers early in their careers.
Who Bears the Cost
- State and local education agencies: The bill prevents them from offsetting the federal credit by lowering their teacher pay or loan‑forgiveness programs, forcing districts/states to absorb the fiscal impact of maintaining or raising local compensation without reaping the budgetary ‘savings’ of federal dollar flows to individual teachers.
- Early childhood program operators and small providers: They gain eligibility but must collect and submit data to DOE on request and may face administrative and compliance costs to document staff eligibility and maintain salary schedules.
- School employers and collective bargaining units: Districts and other employers must redesign compensation accounting to exclude the federal credit from bargaining calculations and can be subject to FLRA investigations if reassignment or punitive actions are alleged.
- Department of Education and Treasury: Both agencies acquire new operational responsibilities — DOE to collect and transmit school‑level data and Treasury to administer a targeted refundable credit — which will require staffing, systems, and data reconciliation resources.
Key Issues
The Core Tension
The central dilemma is whether a federally administered, refundable cash supplement targeted by school poverty is the right tool to raise educator pay without displacing state and local responsibility: the bill increases teacher incomes quickly for eligible individuals but forces states, districts, and early childhood funders to demonstrate they have not reduced local compensation — a requirement that is straightforward in intent but difficult and contentious in enforcement and fiscal accounting.
The bill ties a federal refundable cash subsidy to school‑level poverty measures while simultaneously forbidding state/local reductions in teacher compensation; that creates a monitoring and enforcement challenge. DOE must collect accurate, timely school‑level poverty and program eligibility data and transfer it securely to Treasury, but the statute does not fund the specific administrative systems or timelines for reconciliation — meaning implementation will require interagency rulemaking and investment.
The poverty‑ratio formula focuses benefits on higher‑poverty schools, but the school‑level targeting can produce anomalies where teachers in mixed‑poverty schools receive smaller supplements despite serving high‑need students, and it creates incentives for classification and student assignment strategies that could game the metric.
The supplement‑not‑supplant requirement creates another tension. Requiring states and districts to demonstrate they did not reduce compensation to offset federal credits is administratively precise on paper but politically and practically messy in application: districts control salary schedules and local bargaining, and proving a counterfactual — what they would have paid absent the credit — is inherently speculative.
The bill’s employer protections and FLRA enforcement mechanism import federal labor remedies into situations that often involve state and local government actors, raising questions about jurisdictional interplay and the FLRA’s capacity to handle potentially large numbers of claims. Finally, the credit’s maximums (particularly the large $14,000 cap for the targeted portion) raise fiscal and targeting trade‑offs: generous caps improve support for individual teachers but increase aggregate cost and could shift recruitment incentives in ways the bill does not expressly address.
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