Year-end tax planning and the EFTC: which December matters

The effective date, in the statute’s words

A donor recently asked us a question we expect to hear all autumn: “What do I need to do before December?” The honest answer for 2026 is: probably nothing, and possibly the opposite of what year-end instinct tells you. The reason sits in one sentence of the enacting law. Section 70411(c) of the One Big Beautiful Bill Act provides that the §25F amendments “shall apply to taxable years ending after December 31, 2026”. For a calendar-year taxpayer, the first taxable year that ends after December 31, 2026 is 2027. And because §25F(a) credits “qualified contributions made by the taxpayer during the taxable year,” the first contributions that can generate the credit are those made on or after January 1, 2027.

That single date rearranges the usual year-end playbook. Charitable planning normally pushes gifts earlier, into December, to capture a deduction in the current year. For this credit, in this one transition year, the smart move runs the other way. Our timeline of key dates walks the full rollout; this article is about what the calendar means for your giving.

The December 2026 trap

Here is the trap in concrete terms. Suppose you write a $1,700 check to a Scholarship Granting Organization on December 20, 2026, expecting the federal credit you have been reading about. You get nothing under §25F. Not a reduced credit, not a credit claimed later: nothing, because the section does not apply to your 2026 taxable year at all. The same $1,700, given on January 5, 2027 to a qualifying SGO in a covered state, comes back to you dollar-for-dollar on your 2027 return, up to the $1,700 per-return cap.

Expect some confusion in the wild here. SGOs will be fundraising through late 2026 to build their launch pipelines, and year-end appeal season will land right on top of the credit’s publicity. Both things can be true: the organizations genuinely need 2026 money to stand up operations, and a 2026 gift genuinely earns no federal credit. A well-run SGO will say so plainly in its December appeal.

What a 2026 gift is still worth

None of this makes a December 2026 gift foolish. It just makes it a regular charitable gift, and regular charitable gifts still carry their regular tax treatment:

• The §170 deduction. A 2026 contribution to an SGO (a 501(c)(3) public charity) is deductible if you itemize. Since §25F does not apply to 2026, the no-double-benefit rule does not bite; the deduction is simply the only federal benefit available.
• State scholarship credits, where they exist. A number of states have run their own scholarship tax credit programs for years, some worth far more per donor than $1,700, and those state programs reward 2026 gifts on their own schedules and caps. If you live in a state with such a program, a December 2026 gift can still be excellent tax planning at the state level. See how the federal credit compares to state programs for that landscape.
• The mission itself. Scholarship funds awarded for the 2026-27 school year come from money raised now, not from 2027 credited donations.

One forward-looking wrinkle for donors in state-credit states: once §25F is live, §25F(b)(2) reduces the federal credit by any amount allowed as a credit on your state return for the same contributions. From 2027 on, the same dollars cannot earn both credits in full. In 2026 there is no interaction to worry about, because there is no federal credit to reduce.

Once the credit is live: December 31 is real

The transition-year advice inverts the moment the calendar turns. From 2027 forward, year-end works the way donors expect it to. §25F(a) allows the credit for contributions made during the taxable year, so a calendar-year taxpayer who wants the credit on the 2027 return must make the gift by December 31, 2027. Give on January 3, 2028 and the credit belongs to tax year 2028 instead: not lost, but a year deferred, which matters if you were counting on it against a particular year’s liability.

Treasury has not issued §25F-specific rules on the mechanics of when a late-December gift counts as “made,” questions like a check mailed December 30 or a card charged on New Year’s Eve. Since a qualified contribution is defined as a charitable contribution of cash, the sensible expectation is that ordinary charitable-contribution timing principles will govern, but that is an expectation, not settled guidance. The practical planning answer does not depend on it: do not run a four-figure credit up against the last 48 hours of the year. Give in early or mid-December, get the acknowledgment in hand, and leave the edge cases to people who enjoy them.

Cash only, and what that does to December habits

Year-end giving has a signature move: donate appreciated stock, skip the capital gain, deduct the full value. That move does not work for this credit. §25F(c)(3) defines a qualified contribution as “a charitable contribution of cash to a scholarship granting organization,” and cash means cash: check, electronic transfer, card, payroll deduction. Securities, cryptocurrency, real estate, donated services, none of it generates a §25F credit, however it is timed. (Earlier drafts of the bill allowed stock; the enacted law does not, and older articles describing stock donations are describing a bill that never became law.)

For a donor who does both kinds of giving, the clean December playbook from 2027 on is a split: cash to the SGO for the credit, up to $1,700, and appreciated securities to your other charities (or to the SGO as a regular §170 gift) for deduction planning. The two strategies coexist fine; they just cannot occupy the same dollars.

One dollar, one benefit

§25F(e) closes the double-dip directly: any qualified contribution for which the credit is allowed “shall not be taken into account as a charitable contribution for purposes of section 170.” Each dollar gets one treatment. The choice is not close: a credit returns the whole dollar, a deduction returns your marginal rate on it, so the credit wins for the first $1,700 at any bracket. Dollars above the cap revert to ordinary charitable treatment, so a $3,000 cash gift in 2027 can produce a $1,700 credit plus a $1,300 deduction if you itemize.

Married couples should plan around $1,700 per joint return, not $3,400. The statute caps the credit at $1,700 “to any taxpayer,” and while a minority reading argues a joint return should get two caps, Treasury has not resolved the question and the prevailing expert view is a single $1,700. The donor guide covers the joint-filer question and worked examples in detail. Until guidance lands, the conservative year-end plan for a couple is one $1,700 credited gift, with anything beyond it treated as ordinary giving.

If the credit exceeds your tax bill

The credit is non-refundable: it can take your federal income tax to zero but not below. Year-end planners sometimes treat non-refundable credits as use-it-or-lose-it and try to fine-tune December giving to match projected liability. §25F makes that unnecessary. Under §25F(f), any excess credit carries forward to the succeeding year, for up to five taxable years after the year the credit arose, with credits used on a first-in first-out basis.

So a retiree with $1,200 of 2027 liability who gives $1,700 in December 2027 loses nothing: $1,200 offsets 2027, and $500 rides into 2028. The carryforward removes the one good excuse for December liability-matching gymnastics. Give the amount you intend to give; the credit finds your liability over the following five years.

The paperwork to keep

Two documents matter, and both come from the SGO at or after the time of your gift:

• The written acknowledgment, recording the date, amount, and purpose of the donation. This mirrors the substantiation rule for charitable contributions generally, and for a late-December gift it is also your evidence of which year the contribution belongs to.
• Your unique donor number. Treasury’s June 2026 guidance preview describes a reporting system in which the SGO issues each donor a unique number on the acknowledgment, reports contributions to the IRS under that number, and the donor reports it on the federal return, so the IRS can match your claimed credit without you ever giving the SGO a Social Security number. The full mechanics are in our donor-number explainer.

Keep both with your return records for at least three years, the standard IRS audit window. The specific form or schedule for claiming the credit is expected before the 2027 filing season; the acknowledgment and donor number are what you will need to fill it in.

A planning checklist by calendar

Fall 2026

• Pick your SGO, but hold the credited gift. Confirm the organization expects to be on a covered state’s list for 2027. Broad participation makes this easier than it sounds: the IRS’s official roster shows 28 states with completed advance elections, and our participation map counts 30 (Kansas and Kentucky are in by state action but have not yet filed the formal federal election, and the roster catches up as each files).
• If your state runs its own scholarship credit, decide whether a 2026 gift makes sense under the state program on its own merits.

December 2026

• Do not give for the federal credit. If you give anyway, for the mission, for a state credit, for a deduction, do it knowing §25F pays nothing for it.
• If you itemize, a 2026 gift is a normal §170 deduction; keep the acknowledgment.

January 2027

• Make the credited gift: cash, to a qualifying SGO in a covered state. This is the earliest date the credit exists, and an early-year gift puts twelve months between you and any timing question.
• Collect the written acknowledgment and your donor number, and file them with your tax records.

Through 2027

• Track the cap: $1,700 per return for the year, with joint filers planning conservatively at a single cap until Treasury rules.
• Route appreciated-stock giving to §170 treatment; it cannot earn the credit.

December 2027, and every December after

• Complete any remaining credited giving by December 31, comfortably before the deadline, not on it.
• Do not trim the gift to your projected liability; the five-year carryforward absorbs any excess.
• Claim the credit on that year’s return the following spring, starting with the 2027 return filed in early 2028.

Frequently asked questions