The Education Freedom Tax Credit (EFTC)

Yes. You may qualify for both credits if you make separate donations to each program; however, you cannot claim both credits for the same contribution.

No. Only individual taxpayers can claim the federal credit.

No. Donations cannot be earmarked for a specific student. SGOs independently determine scholarship recipients based on eligibility and available funds.

No. The program is uncapped; there is no aggregate limit on the total credits available.

Families in non-participating states cannot receive scholarships, though taxpayers can still claim the credit by donating to an SGO in a participating state. Your tax dollars fund scholarships for students somewhere, they just go to another state.

EFTC scholarships are available to households whose income for the calendar year before they apply is at or below 300% of Area Median Gross Income (AMGI, as defined in IRC §42 and published annually by HUD as area median income tables, by county and family size). Scholarships can fund private school tuition, microschool and homeschool expenses, tutoring, and educational therapies including for students with disabilities, expanding options for families who can't otherwise access them. By statute, SGOs must give priority to (1) students who received a scholarship from the SGO the prior school year and (2) siblings of prior recipients; some SGOs further prioritize special-needs students or specific underserved communities, though that is at each SGO's discretion.

No scholarship funding cost falls on the state. EFTC is funded through federal tax credits, so there is no state appropriation and no impact on state education budgets, and the credit itself is administered federally by the IRS and U.S. Department of the Treasury. A participating state's role is to elect to opt in and submit its list of qualifying SGOs to Treasury each year, modest administrative steps, not new spending.

EFTC scholarships follow the student, not the school. They cover qualified K-12 education expenses (as defined in IRC §530(b)(3)(A)), including tuition and fees, tutoring, books and supplies, online courses, and special-needs services, for eligible students across a range of settings: private schools, microschools, homeschooling, and public or charter school students who use them for qualified expenses beyond free tuition. The emphasis is on meeting individual student needs rather than one-size-fits-all approaches.

EFTC scholarships can be used for specialized services often critical for students with disabilities, including occupational therapy, physical therapy, behavioral therapy, speech-language services, assistive technology, and access to schools with specialized instruction designed for specific learning needs.

As Colorado Governor Jared Polis stated, 'I would be crazy not to opt in.' If a state doesn't participate, federal tax dollars from its residents will flow to scholarships in other states instead. Opting in captures these federal resources at zero state cost, serves working families across the income spectrum, and gives families educational options without affecting state-budget priorities.

Like any tax-credit program, EFTC isn't immune to abuse, but Congress built strong statutory safeguards into §25F. The credit is capped at $1,700 per return, which limits the incentive for fraud. Qualifying donations must be made in cash and cannot be earmarked for specific students. The IRS and U.S. Department of the Treasury provide federal oversight, and scholarship granting organizations must be 501(c)(3) public charities (not private foundations) that spend at least 90% of their income on scholarships, keep contributions in separate accounts, file annual reports, and serve at least 10 students who do not all attend the same school. Treasury's June 2026 guidance preview adds two more layers: every SGO would need an annual audit furnished to each state that lists it, and a unique-donor-number system would let the IRS match every claimed credit to a real donor and a real SGO, without donors ever giving an SGO their Social Security number.

You can receive a dollar-for-dollar federal tax credit of up to $1,700 per year by donating to a qualified scholarship granting organization. This means if you donate $1,700, you reduce your federal tax liability by $1,700. Unused credits can be carried forward for up to five years. If your state also offers a scholarship tax credit, you may qualify for both by making separate donations.

Yes, a refund does not disqualify you. A refund only means your paycheck withholding was larger than your final tax bill, so the IRS hands the extra back. It does not mean you owed no tax. The credit applies to your total federal tax liability, the tax you actually owe on your income, not to your refund or to any balance due at filing. Example: your tax liability for the year is $15,000 and your employer withheld $20,000, so you're due a $5,000 refund. A $1,700 EFTC credit cuts your liability to $13,300, which increases your refund to $6,700. You receive the full $1,700 either way, as a larger refund if you're getting one, or as a smaller bill if you owe at filing. The only limit is that the credit can't exceed your liability for the year (it's non-refundable), but any taxpayer with at least $1,700 of federal tax, almost anyone with a normal income, gets the full benefit, and lower earners can carry the unused portion forward up to five years.

Most likely no. The statute caps the credit at $1,700 'to any taxpayer for any taxable year' and contains no language doubling that amount for a joint return, so the prevailing expert reading is that a married couple filing jointly receives a single $1,700 credit, not $3,400. (Two single filers each have their own $1,700 cap on their own returns.) Treasury has not issued final guidance on joint-filer treatment, its June 2026 guidance preview left the question open, with proposed regulations due by the end of September 2026, so plan conservatively at $1,700 per return until it does.

No. EFTC is funded through federal tax credits, not through state or local education budgets. Public school funding remains unchanged. Additionally, EFTC scholarships can be used to support students in public schools through tutoring, dual enrollment courses, educational therapies, and specialized services. The program expands options without reducing public school resources.

EFTC is a federal tax credit against your federal income taxes, while state scholarship tax credits reduce your state tax liability. EFTC offers up to $1,700 per taxpayer with no aggregate cap nationwide. State programs vary by state with different credit amounts, caps, and eligibility rules. You can potentially benefit from both programs by making separate donations, one to a federal EFTC-qualified SGO and one to a state-qualified organization.

The EFTC credit becomes available starting with the 2027 tax year (taxes filed in 2028). Donations made on or after January 1, 2027 to qualified scholarship granting organizations in participating states will be eligible. States are currently opting in and designating qualified SGOs in preparation for the launch.

Scholarship granting organizations (SGOs) are responsible for verifying eligibility. They must confirm that recipients live in households at or below 300% of area median income and are eligible to enroll in public K-12 schools. Under Treasury's June 2026 guidance preview, SGOs could verify income directly (paystubs, tax returns, IRS transcripts, W-2s, or commercial data sources), rely on a household member's participation in a needs-based federal, state, or tribal program, and treat foster children as automatically income-qualified. SGOs file annual reports with oversight from the IRS and Department of the Treasury, ensuring scholarships reach the intended beneficiaries, working families seeking educational options.

It depends on your state, and it is more complicated than it first appears. Every K-12 child is an eligible student, but a scholarship can only pay for a 'qualified expense,' which the law (IRC §530(b)(3)(A)) ties to a 'public, private, or religious school' as defined under your state's law. Where a state treats the home itself as a school, homeschool expenses, curriculum, online courses, tutoring, educational therapies, books, supplies, and technology, can qualify. Where a state routes home education through a separate 'home instruction' category that is not a school, a homeschooler may have no qualifying expense to spend the scholarship on. Treasury confirmed in its June 2026 guidance preview that a home school is treated as a school 'if it is treated as a school under State law,' so the answer turns entirely on which state you live in. We classified all 50 states plus DC. See the state-by-state homeschool eligibility map →

At least 90% of all donations to qualified scholarship granting organizations must be used for scholarships, this is a federal requirement. SGOs can use up to 10% for reasonable administrative costs. This high threshold ensures the vast majority of every donation directly benefits students and families.

To become a qualified SGO, your organization must: (1) be a 501(c)(3) public charity (not a private foundation), (2) operate in a state that has opted into EFTC, (3) be designated by that state as an eligible SGO, (4) commit to using at least 90% of donations for scholarships, (5) serve at least 10 students across multiple schools, and (6) verify recipient eligibility and file annual reports. Contact your state education agency for specific designation procedures.

Yes. Many existing scholarship granting organizations that currently operate state-level scholarship tax credit programs can also participate in EFTC, provided they meet the federal requirements and receive state designation. Organizations can administer both state and federal scholarship programs simultaneously, expanding their ability to serve families.

Qualified SGOs must file annual reports demonstrating compliance with EFTC requirements. These reports verify that at least 90% of donations were used for scholarships, that recipients met income eligibility (at or below 300% of area median income), that scholarships were awarded to at least 10 students across multiple schools, and that no donations were earmarked for specific students. The IRS and Department of the Treasury oversee this reporting. Treasury's June 2026 guidance preview adds specifics: an annual financial and programmatic audit furnished to each listing state (with a streamlined internal-committee option for smaller SGOs), donor acknowledgments carrying unique IRS-method donor numbers, contribution reporting to the IRS under those numbers, and a planned IRS portal for SGO administration.

Yes, within the federal framework. SGOs can establish additional selection criteria beyond the federal income requirement, such as prioritizing students from specific geographic areas, students with special needs, first-generation students, or students from underserved communities. However, scholarships must serve at least 10 students across multiple schools, and all recipients must meet the federal income eligibility threshold.

The timeline varies by state. Once a state opts in and establishes its SGO designation process, qualified organizations can typically apply and receive approval within weeks to a few months, depending on the state's procedures. Organizations should prepare by ensuring their 501(c)(3) status is current, developing scholarship selection and verification processes, and establishing reporting systems to meet federal requirements.