TL;DR
- A tax credit scholarship is a K-12 scholarship paid for by donations that earn the donor a tax credit. The donor gives to a nonprofit scholarship granting organization (SGO), the SGO awards the scholarships, and the donor pays less tax.
- A federal program starts January 1, 2027: donors get a credit of up to $1,700 per taxpayer, and families in participating states can apply for scholarships. 31 states are on our map so far.
- Families qualify if the child lives in a participating state and can enroll in a public school, and household income is at or below 300% of the area median. Treasury estimates that covers about 95% of children.
- Several states, including Arizona, Florida and Pennsylvania, also run their own tax credit scholarship programs with their own rules.
How a tax credit scholarship works
- A donor gives cash to a scholarship granting organization (SGO), a nonprofit approved under the program.
- The donor gets a tax credit, which cuts their tax bill dollar for dollar, unlike a deduction, which only lowers taxable income.
- The SGO awards scholarships to eligible students, who use them for costs like private-school tuition. The SGO chooses the students; donors can’t pick a particular child.
The money never passes through the government. The tax credit is what makes the gift attractive: the federal credit is dollar for dollar, so for a donor with enough tax liability a gift of up to $1,700 costs nothing after taxes.
The federal tax credit scholarship (from 2027)
Congress created the first federal tax credit scholarship program in 2025. It goes by several names: the Education Freedom Tax Credit (EFTC), the Federal Scholarship Tax Credit (FSTC, the IRS’s name) and IRC §25F. It applies to gifts made on or after January 1, 2027.
Each state decides whether to take part, one year at a time. The IRS's published list names 30 states (as of October 22, 2026), and our tracker counts 31: those 30 plus New York (announced October 9, 2026), where the governor has decided to participate but the advance election is not on the IRS list yet. See every state’s status on the state-by-state map.
For families: who qualifies and how to get one
A student can receive a federal tax credit scholarship if:
- The student lives in a participating state.
- The student is eligible to enroll in a public elementary or secondary school.
- The household’s income is at or below 300% of the area’s median gross income, adjusted for family size (check your household).
Scholarships pay for qualified K-12 expenses. Treasury lists private-school tuition, academic tutoring, special-needs services, books, supplies, computers and other equipment among them, and the IRS’s separate guidance on the full list is still pending (what the scholarships can pay for). Federal scholarships are tax-free to the family under IRC §139K.
How to apply: you apply to an SGO on your state’s list. States send their 2027 lists to the IRS by February 15, 2027. SGOs give priority first to students renewing a scholarship, then to their siblings. Our approved SGO list and SGO directory show who is approved or applying in each state. Full detail is in who qualifies for an EFTC scholarship.
For donors: how to give and claim the credit
- Up to $1,700 per taxpayer. Under Treasury’s proposed regulations, which donors may rely on for 2027 gifts, spouses filing jointly are separate taxpayers, so a couple can reach $3,400 if each spouse gives.
- Cash only, designated when you give. Checks, card payments, transfers and after-tax payroll deductions count; stock and crypto don’t.
- Any participating state. You can give to an SGO in any participating state, wherever you live.
- Claim it on Form 8525 with your 2027 return, using the donor number on the SGO’s acknowledgment. Treasury’s proposed rules name the form; the IRS hasn’t released it yet (Form 8525, how to claim the credit).
State tax credit scholarship programs
Long before the federal program, states built their own. Arizona’s dates to the 1990s, and Florida, Pennsylvania, Indiana, Ohio, Georgia and Iowa are among the others. Each sets its own credit rate, caps and student eligibility, and those change often, so check your state department of revenue for current numbers. State and federal credits can be combined on the same gift as long as together they don’t exceed what you gave; the details, and how organizations run both, are in state tax credit scholarship programs and the federal credit.
Tax credit scholarships vs. vouchers and ESAs
A voucher is public money a state pays toward private-school tuition. An education savings account (ESA) puts public money in an account parents spend on approved costs. A tax credit scholarship is funded by private donations, with the tax credit as the incentive, and the scholarship organization, not the government, picks the students. See SGOs vs. ESAs vs. vouchers for the side-by-side.
Frequently asked questions
What is a tax credit scholarship?
A tax credit scholarship is a K-12 scholarship paid for by donations that earn the donor a tax credit. A donor gives to a nonprofit scholarship granting organization (SGO), the donor's income tax goes down by the credit, and the SGO uses the money to award scholarships to eligible students for costs such as private-school tuition. Several states have run their own programs for years, and a federal program, the Education Freedom Tax Credit (also called the Federal Scholarship Tax Credit, IRC §25F), starts January 1, 2027.
How do I get a tax credit scholarship for my child?
You apply to a scholarship granting organization, not to the IRS or the state. For the federal program, your state has to participate, and the SGO has to be on your state's list (states submit their 2027 lists to the IRS by February 15, 2027). Your child must live in that state and be eligible to enroll in a public school, and your household income must be at or below 300% of your area's median gross income. Treasury estimates about 95% of American children fall under that income limit.
How much is the federal tax credit for scholarship donations?
Up to $1,700 per taxpayer, dollar for dollar, for cash gifts made in 2027 or later to an SGO on a participating state's list. Under Treasury's proposed regulations, which donors may rely on for 2027 gifts, spouses filing jointly are treated as separate taxpayers, so a couple can reach $3,400 when each spouse makes and designates a gift. The credit is nonrefundable, and any unused amount carries forward for up to five years. Donors claim it on Form 8525, the form Treasury's proposed rules name; the IRS hasn't released it yet.
Can I donate to a tax credit scholarship for my own child?
No. §25F bars SGOs from earmarking or setting aside a scholarship for a particular student, so a donor can't direct a gift to their own child or any named student. A parent can still donate and claim the credit, and the child can still apply like any other eligible student, unless the parent becomes a substantial contributor to that SGO (more than $5,000 and more than 2% of its contributions in a year), which bars the family from its scholarships.
Is a tax credit scholarship taxable income for the family?
Not for federal scholarships. IRC §139K excludes from income amounts received after December 31, 2026 from an SGO scholarship for qualified K-12 expenses of an eligible student. State programs follow their own state rules.
Does my state have to opt in for families to get a federal tax credit scholarship?
Yes. Scholarships go only to students who live in a participating state, from SGOs on that state's list. Donors are different: a donor in any state can give to an SGO in any participating state and claim the credit.
