30 states, any donor: under Treasury's §25F rules you can give across state lines, and scholarships follow where students live

Where a donor lives does not matter under the federal Education Freedom Tax Credit. Where a student lives does. Treasury's proposed regulations, released October 1, 2026, settle both halves of that. On the giving side, the preamble says a taxpayer "may contribute to any SGO without regard to the taxpayer's residence." Treasury counts 30 states that had elected to participate as of August 2026, and every SGO those states list is open to a donor anywhere in the country.

Treasury's own illustration is short: "a taxpayer residing in State X may contribute to an SGO in State Y so long as the SGO is on State Y's SGO list." The donor can rely on the organization's presence on the IRS SGO list at the time of the gift, "regardless of which covered States included the organization on their respective State SGO lists." The regulation text is explicit: "A taxpayer may make a qualified contribution to any SGO on any State SGO list, regardless of the taxpayer's State of residence." So a donor is never limited to SGOs in their own state, and a donor who lives in a state that has not opted in can still give to an SGO in one that has and claim the credit. When an SGO is listed in more than one state, the donor chooses which state's §25F account the gift goes into, and the SGO must deposit it that way.

The student side turned on four words in the statute. A qualified contribution must fund scholarships for eligible students "solely within the State" where the SGO is listed, and commenters read that two ways: as a limit on where students live, or as a limit on where the scholarship is spent. Treasury chose residence. The proposed rule says a student is solely within a state "only if the eligible student resides in that State in accordance with State law," and adds: "Attending school in a State or purchasing goods or services in a State is not sufficient to treat the student as being solely within a State."

Treasury's two examples show how that works. Organization EF is listed only in State X. Student A lives in State X and attends school in State Y; Student B lives and attends school in State Y. EF can award a scholarship to Student A but not to Student B. Organization GH is listed in both State X and State Y. It can fund Student A from its State X account and Student B from its State Y account, but it cannot fund Student C, who lives in State Z and attends school in State Y.

The economic analysis and one of its footnotes spell out the border cases. A student who lives in a participating state but attends school in a state that has not opted in can still receive a scholarship. A student who lives in a non-participating state cannot receive one from an SGO in either state, even if the school is in a participating state. Treasury says it has no data on how many students fit that pattern and expects the residence rule to shift which students receive scholarships rather than reduce the total. It is one more way a state's own decision reaches its families, a point we cover in what happens when a state stays out.

There are two exceptions. A student who is a dependent of a member of the Armed Forces is treated as solely within both the state of the student's domicile and the state where the service member resides. Treasury cites about 821,500 school-age children in military families and estimates the exception will benefit as many as 33,600 students a year, which it calls an upper bound. A student who is a dependent of someone residing on Indian Lands is treated as within both the state of residence and the state where the student attends school; Treasury puts that group at as many as 6,200 students a year, based on Bureau of Indian Education boarding schools and dormitories.

Treasury weighed the alternatives. Some commenters wanted school location to control, and another wanted funds to follow the student wherever they enroll, as West Virginia's Hope Scholarship and Indiana's voucher program do. The residence reading matches the split we described in August, when we explained that donors can be anywhere while scholarships stay in-state. These are proposed rules. Treasury says taxpayers, SGOs, and states may rely on them for contributions made on or after January 1, 2027, and comments are open through December 1. The full text is in our archive of the proposed regulations.

For SGOs, the practical read is a national donor pool and a residence check on every applicant, determined under state law. Families can see whether their state is in on the states page. Organizations getting ready for January can work through formation with the free SGO Builder and see who is already operating in the SGO directory.