Texas opts into the federal §25F scholarship tax credit, layering the $1,700 donor credit on top of its new $1B ESA

Governor Greg Abbott (R) announced on December 10, 2025 that Texas intends to opt in to the federal Scholarship Tax Credit (FSTC / ECCA / §25F), the program enacted under the One Big Beautiful Bill that lets individuals claim a dollar-for-dollar federal credit of up to $1,700 per year for gifts to qualifying Scholarship Granting Organizations. The governor's office framed the decision as a stated intent to participate rather than a completed filing, and the federal listing was confirmed months later: IRS news release IR-2026-76, published June 8, 2026, names Texas among the 27 states signed up for the program. Under §25F, contributions above the $1,700 cap carry forward for up to five years, eligibility runs to families at or below 300% of area median income, and the program launches January 1, 2027.

What makes the Texas move distinctive is the layer it sits on. Texas just stood up its own state-funded education savings account program, the Texas Education Freedom Accounts (TEFA), created by Senate Bill 2, which Abbott signed on May 3, 2025. Reporting on the signing put the initial allocation at roughly $1 billion, with the program slated to launch in the 2026-27 school year, and the Texas Comptroller adopted the implementing TEFA rules published in the December 12, 2025 Texas Register. By opting in to §25F two days before those rules posted, Texas positioned the federal $1,700 donor credit to run alongside its own ESA rather than in place of it. The two programs are funded and administered separately: TEFA is a state appropriation that puts money directly into family accounts, while §25F is a federal tax credit that incentivizes private donations into SGOs, which in turn fund scholarships.

A point of mechanics worth keeping straight: the December 10 announcement was a stated intent to opt in, not a documented formal election. No public source shows Texas filing the IRS advance-election paperwork (Form 15714) specifically, and the confirmation that matters is the IRS roster itself. That official list of 27 states, released in June 2026, is what moves Texas from announced intent to confirmed participant. The distinction is the same one that has separated talk from commitment in other states this cycle, where governors signaled support well before any binding step was on the record.

For SGO operators and donors, the Texas setup is unusually rich. Texans will be able to support scholarships through the federal §25F credit while the state separately funds ESAs through TEFA, which means two parallel money streams aimed at private-school access, governed by two different rulebooks. Donors take the $1,700 credit on their federal return; families draw on TEFA dollars through the state. The volume of need in a state this size, combined with fresh ESA infrastructure, makes Texas a natural early market for new SGOs, and operators standing up a program will need software built specifically for §25F donation routing, receipts, and the annual eligibility and carryforward tracking the statute requires. Our SGO directory and explainers walk through what that operationally takes.

Texas now sits alongside Virginia, Florida, Colorado, and the rest of the confirmed roster heading into the January 1, 2027 launch. The open questions for the year ahead are the same ones facing every participating state: how Treasury's proposed regulations land, whether states can add their own conditions to the SGO list, and how the federal $1,700 credit interacts with state programs already on the books. Texas is one of the clearest tests of that last question, since few states are pairing a billion-dollar ESA with the federal credit on this timeline. Current status for Texas and every other state is tracked on our Texas state page and the national participation map.