Treasury will read §25F expenses as broadly as the law allows, and payroll-giving guidance for employers is coming soon

Yes, more guidance on what §25F scholarships can pay for is on its way, and Treasury says it will be generous. “We are going as broad as we can in terms of reading the statute to include as many education-related expenses within the bounds of what the statute allows,” Kevin Salinger, Treasury's acting assistant secretary for tax policy, said on Thursday, November 12, at a post-midterm event in Washington hosted by Whiteboard Advisers, Education Week reported. He said regulators are working “aggressively and quickly” on guidance covering “a large range of educational needs,” and the IRS is “targeting by the end of the year” to publish an update to the draft rules it released in October.

Why the expense list matters most to public schools. The Education Freedom Tax Credit (§25F) doesn't write its own list of expenses. It borrows the Coverdell list in §530(b)(3)(A): tuition, fees, academic tutoring, special needs services for a special needs beneficiary, books, supplies and equipment; room and board, uniforms, transportation and supplementary items and services, including extended day programs, when a public, private or religious school requires or provides them; and computer technology, equipment and internet access. The proposed rules define a qualified expense as one described there “and any guidance thereunder” (prop. § 1.25F-1(a)(14)), and that separate guidance is where Treasury will say how far each item reaches. Private schools charge tuition, so their students have an obvious use for a scholarship. Public and charter schools don't, and for their students the width of the reading decides what a scholarship can buy: tutoring, a school's after-school program, a laptop and internet at home, school transportation. Salinger didn't name any expense that is in or out on Thursday (what the list covers today).

The year-end target holds. On an October 1 call with the Federal Scholarship Tax Credit Coalition, Salinger said the separate guidance on which expenses scholarships can pay for would be released by the end of the year, and that final regulations probably won't be in place until 2028, The 74 reported. Thursday's timeline lines up with that. The proposed rules are open for comment through December 1 (how to comment), with a telephone-only hearing on December 15. Until final rules are published, taxpayers, SGOs and states may rely on the proposed rules for contributions made on or after January 1, 2027, if they follow them in full and consistently.

Payroll giving gets an employer playbook. Treasury also plans to release guidance “very soon” for employers on setting up payroll deductions, so employees can send contributions to the SGOs they choose straight from their paychecks, Salinger said. The rule underneath is already settled: the proposed and temporary rules both count an “after-tax payroll deduction” as cash for a qualified contribution (prop. § 1.25F-1(a)(12)(iii)). What employers haven't had is a how-to. Each deduction has to be designated to the SGO as a §25F contribution when it's made, and the SGO, not the employer, sends the donor's acknowledgment and reports each donor to the IRS, so a payroll program has to carry every employee's designation through to the SGO. Public school districts are already counting on this channel. Sioux Falls plans payroll giving for district staff, and the Fort Wayne Community Schools Foundation wants local employers to add its SGO to their payroll options (how the paycheck route works for donors).

A push to reach people who have never given. In recent weeks, Treasury officials have met with tax return preparers about setting up automatic notifications that point filers toward giving to SGOs this spring, Salinger said. “The way that this credit works hasn't fully seeped into the public consciousness yet, or even the consciousness of the state governments, even in the states that have opted in,” he said. He expects the usual education donors to be a small slice of who gives: “We need to get this message out to not only them, but to people who do charitable giving every year, and even to people who have never done charitable giving in their life.” Then: “But now it's free to do so, so why not?”

What free means here, and when. For a donor who owes at least that much federal income tax, the credit returns a gift dollar for dollar up to $1,700 per taxpayer, or $3,400 on a joint return when each spouse gives; a state tax credit for the same gift comes off the gift before the $1,700 cap applies. It counts gifts made on or after January 1, 2027. So a gift prompted during next spring's filing season counts toward the 2027 tax year and is claimed on the return filed in 2028, not on the 2026 return being filed at the time (how the credit works).

Not every request pushes wider. A coalition of 12 disability advocacy groups wrote to Salinger the week before, urging him to make clear that “no scholarship funds should be used for any services to which a student is entitled under applicable federal or state law,” Education Week reported. That goes to the special needs services line. The proposed rules' preamble already says nothing in §25F or the rules alters a state's obligations under other federal and state law, naming the Individuals with Disabilities Education Act as the example (§25F and special needs).

What it means for SGOs. Salinger said Treasury wants the credit to succeed, and the two pieces he promised are the two most SGOs are waiting on: what scholarships can pay for, and an easy way for working people to give. Until the expense guidance is out, fund what §530(b)(3)(A) plainly names and hold off on promising families a specific non-tuition expense. If payroll giving is part of your donor plan, start the employer conversations now so the designation step is ready when Treasury's guidance lands (recruiting donors). And if you want a say in the rules themselves, the comment window closes December 1.