Last updated November 2026. Based on the law and proposed IRS regulations published October 2026.
What is the federal scholarship tax credit?
The One Big Beautiful Bill Act, signed in 2025, created a new federal income tax credit in Section 25F of the Internal Revenue Code. It is often called the federal scholarship tax credit, the Education Freedom Tax Credit, or the federal tax credit scholarship program.
The idea is simple. When you donate to an approved Scholarship Granting Organization (SGO), your federal tax bill goes down by the same amount, up to the limit. The SGO then uses those donations to fund scholarships for K-12 students from low- and middle-income families.
Because it is a credit and not a deduction, it reduces the tax you owe dollar for dollar. Give $1,700, and your federal tax drops by $1,700.
The key numbers
| Item | Rule |
|---|---|
| Maximum credit | $1,700 per person per year |
| Married filing jointly | Up to $3,400 when each spouse gives up to $1,700 (proposed regulations) |
| Start date | Donations made on or after January 1, 2027 |
| When you claim it | On your federal return for the year you gave (2027 gifts go on the 2027 return, filed in 2028) |
| Unused credit | Carries forward up to five years |
| Who can claim | Individuals with federal income tax liability |
| Where to give | An SGO on a participating state's list, sent to the IRS each year |
Which states participate?
The credit only works through SGOs in states that opt in. Each participating state sends the IRS a list of approved SGOs every year. The IRS reported that 30 states had opted in for 2027 as of September 2026, and more have joined since. Give for Kids Scholarship Fund is a certified SGO in a participating state.
Donors can give to an SGO in any participating state, no matter where the donor lives. For the official, current list of states and SGOs, see the IRS announcement and resources.
Combining it with a state scholarship credit
Some states offer their own scholarship tax credits. The programs can work together, with one important rule: the federal credit is reduced by any state credit you claim for the same qualified donations. The simplest approach is to make separate gifts, one designated for the federal credit and one for the state credit.
Ohio taxpayers: see the Ohio state credit.
How to give for the federal credit
- Donate to Give for Kids Scholarship Fund online or by check, and choose "Federal tax credit" so your gift is designated as a qualified contribution.
- Give by card, bank transfer, or check. Gifts from a donor-advised fund or through a business generally do not qualify for this credit.
- By January 31 of the following year, we send you a written acknowledgement with your unique donor number.
- Give that acknowledgement to your tax preparer when you file.
Your gift is pooled with other donations to fund scholarships. By law, donations cannot be earmarked for a specific student.
What families can use scholarships for
Scholarships are for K-12 students whose household income is no more than 300% of their area's median income. They can be used for qualified education expenses, including tuition, books, tutoring, special needs services, uniforms, transportation, extended day programs, and computers or internet access. Students in public, charter, and private schools can qualify.
SGOs must give priority to students who received a scholarship the year before, and then to their siblings. Learn about applying.
Quick answers
Who can claim the federal scholarship tax credit?
Any individual who owes federal income tax can claim it for cash donations to an approved Scholarship Granting Organization, made on or after January 1, 2027.
How much is the federal scholarship tax credit?
Up to $1,700 per person per year. Married couples filing jointly can claim up to $3,400 when each spouse makes their own qualified donation, under the proposed IRS regulations.
Can businesses claim the credit?
No. The credit is for individuals. Under the proposed regulations, a partner or S corporation shareholder cannot count their share of the business's donation.
What happens if my tax bill is smaller than my credit?
The credit is nonrefundable, but any unused amount carries forward for up to five years.