TL;DR
- EFTC is a federal tax credit; state scholarship tax credit programs are state-level. They’re independent of each other.
- Donors can typically participate in both — but with separate donations and separate substantiation. You can’t double-credit the same dollar.
- EFTC value is uniform nationally: up to $1,700 per tax return, 5-year carryforward. State programs vary wildly in cap, credit percentage, and rules.
- For families: the two programs don’t conflict. You can apply for scholarships funded by either.
- State credits exist independent of EFTC opt-in — a state can not opt in to EFTC but still have a robust state scholarship credit (and vice versa).
The basic difference
Both kinds of programs use the same general mechanism: a donor gives to a nonprofit Scholarship Granting Organization (SGO), and in exchange the donor reduces their tax bill. The difference is which government is paying for the credit:
- EFTC (the federal credit): Claimed against your federal income tax. The U.S. Treasury bears the cost. The credit is uniform across states.
- State scholarship tax credits: The credit is against your state income tax (or, in some cases, other state taxes). The state bears the cost. Each state designs its own program.
Side-by-side comparison
| Feature | EFTC (federal) | State programs |
|---|---|---|
| Tax level | Federal income tax | State income tax (varies) |
| Credit cap | $1,700 / tax return | Varies widely ($500 to $1M+) |
| Credit percentage | 100% (dollar-for-dollar) | 50–100% depending on state |
| Refundable | No (5-year carryforward) | Varies; usually non-refundable |
| Aggregate cap | No nationwide cap | Most states have annual program caps |
| Available in | Opted-in states only | ~20 states with their own programs |
| Eligible students | Federally defined (income tied to area median income) | State-specific income and demographic rules |
Can donors stack the two?
Yes — with one rule. You cannot claim both the federal EFTC credit and a state scholarship credit for the same dollars. But there’s nothing stopping you from making two separate donations: one to a federally-qualified EFTC SGO (and claiming the EFTC credit on your federal return) and another to a state-program- qualified organization (and claiming the state credit on your state return).
What families should know
For families seeking scholarships, the two program types are independent paths, not competing options:
- You can apply for both if your state has both. The eligibility criteria differ; you might qualify for one and not the other, or for both.
- State program scholarships often have longer track records — some have operated for over a decade — which can mean clearer application processes.
- EFTC may unlock scholarships in states that don’t have their own programs, expanding access to families who didn’t previously have a state-level option.
What donors should know
For donors, three considerations:
- Tax efficiency: EFTC’s 5-year carryforward and 100% credit make it efficient even for donors with modest federal liability. State programs vary — check your state’s rules.
- Where dollars go: EFTC dollars stay in opted-in states. State-program dollars stay in the state. Where you want your impact matters.
- Annual planning: Both program types may have enrollment windows and program caps. Plan donations early in the year to ensure you can participate.
States with their own programs
About twenty states currently operate their own scholarship tax credit programs (Pennsylvania, Florida, Arizona, Georgia, Indiana, Iowa, Kansas, Louisiana, Nevada, New Hampshire, Oklahoma, Rhode Island, South Carolina, South Dakota, Virginia, and others). Each program has different rules around eligibility, cap, and credit percentage. The interaction with EFTC depends on whether the state has also opted in to EFTC — some have, some haven’t.
For your state’s EFTC status, see the state-by-state status map. For your state’s state-level scholarship tax credit program, check your state department of revenue or local school-choice advocacy organizations.
Frequently asked questions
Can I donate to both a state scholarship tax credit program and EFTC?
Generally yes, with a critical caveat: you cannot use the same dollars for both credits. To benefit from both, you make two separate donations — one to a federally-qualified EFTC SGO and another to a state-program-qualified organization — and claim each credit on the appropriate tax return.
Which is more valuable: federal EFTC or state credits?
It depends on the state and the donor's situation. EFTC is uniformly $1,700 federal credit per tax return nationally. State credits vary widely: some are dollar-for-dollar with high caps, others are partial credits with low caps, and many states have no scholarship credit at all. For a donor in a state with a strong scholarship credit program, the combined federal + state value can be very high.
Will state credits go away because of EFTC?
No. EFTC is additive. State scholarship tax credit programs were enacted by individual states for state-level reasons and continue independently. EFTC doesn't preempt or replace them.
If my state hasn't opted in to EFTC but has its own credit, can my family still use the state program?
Yes. State scholarship tax credit programs operate entirely under state law and are unaffected by whether the state has opted in to EFTC. Your family's eligibility for state-program scholarships is set by state rules, not federal.
Can SGOs administer both state and federal scholarship programs?
Yes. Many SGOs that operate under state scholarship tax credit programs are also pursuing federal EFTC designation, and can run both programs in parallel. For families and donors, this is convenient — the same SGO can be the conduit for state and federal scholarships.