A reader asked us for “something I can share,” a plain explanation of the new federal scholarship credit that would make sense on a school parent list or a community group chat. This is that page. No tax jargon in the body, just the six questions people actually ask. Forward it freely.
TL;DR
- Starting in 2027, the federal government will give you back up to $1,700 of your federal income tax, dollar for dollar, when you donate to an approved K-12 scholarship organization.
- It’s not a deduction. A $1,700 gift means $1,700 less tax. Your donation funds scholarships for local kids, and it effectively costs you nothing.
- Each state chooses whether to join. Check yours at eftccredit.com/states.
What is it?
Congress created a new federal tax credit for people who donate to K-12 scholarship organizations. These are nonprofits that collect donations and turn them into scholarships for students from lower- and middle-income families, covering things like tuition, tutoring, books, and special-needs services.
Here’s the part worth reading twice. This is a credit, not a deduction. A deduction saves you a slice of what you gave. This credit gives you back the full amount, dollar for dollar, up to $1,700 a year. Donate $1,700, and your federal tax bill drops by $1,700. The money you would have sent to Washington goes to scholarships in your community instead.
When does it start?
Donations start counting on January 1, 2027. You would then claim the credit when you file your 2027 federal return, in early 2028.
A gift made in 2026 does not qualify, so if you’re moved to give today, know that the credit only attaches to donations made on or after that date. Between now and then, the useful move is to learn whether your state is participating and which scholarship organizations serve your community.
Do I qualify?
Almost certainly, yes. The credit is open to individual taxpayers who are U.S. citizens or residents. You don’t need to itemize, you don’t need a high income, and you don’t need kids in school. Two practical notes:
- The gift must be cash (including check or card), given to a scholarship organization on a participating state’s approved list. Stock and property don’t count.
- You need a federal income tax bill to offset. The credit reduces tax you owe; it isn’t a check in the mail. If your credit is bigger than your tax bill, the extra rolls forward to future years (up to five).
One thing people mix up: these are the rules for donors. Scholarship recipients are chosen separately by the scholarship organizations, based on household income limits. If you’re wondering whether your own family could receive a scholarship, that’s a different question with its own answer: who qualifies for a scholarship.
Does my state count?
Each state’s governor decides whether the state participates, and the roster is still moving. As of this writing, the IRS’s official list stands at 28 states, while our tracker counts 30 because a couple of states have committed but haven’t finished the federal paperwork yet. Rather than trust any number in a forwarded article, check your state directly:
And if your state hasn’t joined? You can still claim the credit. The state decision controls where scholarship organizations can operate, not who can donate. Your gift would simply support students in a state that has joined, which is also a good reason to ask your governor to opt in.
How do I actually do it?
Four steps, none of them hard:
- Find a scholarship organization on your state’s approved list (or a participating state’s list). Many communities will have one connected to their local schools.
- Give, any cash amount up to $1,700, on or after January 1, 2027.
- Keep the acknowledgment. The organization sends you a written receipt that includes a donor number. That number is how the IRS matches your gift to your credit, and it means you never give the organization your Social Security number.
- Claim the credit on your federal tax return for that year. If you use an accountant or tax software, hand over the acknowledgment and you’re done.
Can I support MY school?
This is usually the question behind all the other questions, and the answer is yes, at the school level. Many scholarship organizations let you direct your gift toward a specific partner school’s scholarship fund, so your community’s giving supports your community’s families.
What nobody can do is pick the student. The law is strict here: no donor can earmark money for a particular child, including their own. The scholarship organization always decides which eligible students receive awards. Choose the destination, not the recipient.
What’s the catch?
There’s no trapdoor, but three honest fine-print items:
- It offsets tax you owe; it’s not a refund check. If your credit exceeds your federal income tax for the year, the unused portion carries forward for up to five years rather than being paid out.
- No double-dipping. A donation you claim this credit for can’t also be claimed as a charitable deduction. You get the credit, which is the better deal anyway.
- State credits reduce it. If your state gives you its own tax credit for the same donation, your federal credit shrinks by that amount. You don’t get paid twice for one gift.
Share this page
This page was written to be forwarded. Send the link to your school’s parent list, your congregation’s email, or the community WhatsApp, or print it and pin it to the bulletin board. The address is easy to pass along:
And for whether your state is in: eftccredit.com/states
If you want a heads-up when your state’s status changes or new guidance lands, the free weekly newsletter covers exactly that, in the same plain language as this page. The signup form is at the bottom of this page.
For the detail-minded: the program is the Education Freedom Tax Credit, codified at IRC §25F, enacted in July 2025. The full statutory text is archived at /documents/section-25f, the donor-number mechanics are explained at /learn/25f-donor-number, and the school-designation rules at /learn/designating-gifts-to-schools.
Frequently asked questions
Is this a deduction or a credit?
A credit, and that's the whole point. A deduction lowers the income you're taxed on, which saves you a fraction of what you gave. This credit lowers your actual tax bill by the full amount of your gift, up to $1,700. Give $1,000, owe $1,000 less.
Do I have to give the full $1,700?
No. Any cash amount works. $1,700 is just the most you can claim in a year. A $100 gift gets you a $100 credit.
What about married couples filing jointly?
The safe assumption is $1,700 per tax return. Whether a joint return gets more than that is a question Treasury hasn't answered yet, so don't plan around a bigger number.
Can I pick which student gets the scholarship?
No. The law bars donors from directing money to a particular student, including their own children. You can often direct your gift to a specific school's scholarship fund, but the scholarship organization always decides which eligible students receive awards.
Does my child's school need to be private or religious?
Scholarships can support students at private and faith-based schools, and the covered expenses reach further than tuition: tutoring, books, technology, and special-needs services are on the list too. Whether a given school participates depends on it partnering with a scholarship organization in a participating state.
Where can I check if my state is in?
eftccredit.com/states tracks every state and DC, updated as governors act. That's the fastest way to see where your state stands today.
