EFTC in Alabama
Alabama is participating in the federal Educational Choice for Children Act scholarship program. Also known as the Federal Scholarship Tax Credit (FSTC), the program was enacted as IRC §25F and takes effect January 1, 2027.
- Governor
- Kay Ivey
- Republican
- Status
- Opted in
- Program begins
- January 1, 2027
- Federal tax credit live
What EFTC means for Alabama
Because Governor Kay Ivey has opted Alabama into EFTC, families in Alabama will be eligible for scholarships funded through the program when it goes live on January 1, 2027. Designated Scholarship Granting Organizations (SGOs) in Alabama will receive donations from federal taxpayers and distribute them as scholarships to qualifying K-12 students.
Donors in Alabama, and anywhere else in the country, can claim a federal income tax credit of up to $1,700 per tax return for contributions to a qualifying SGO, beginning January 2027. The credit is non-refundable and capped, but it lets taxpayers redirect federal income tax that would otherwise go to the U.S. Treasury into scholarships for students in their own community.
Alabama's participation means federal tax dollars contributed by Alabama residents stay in Alabama, supporting families here rather than flowing to scholarship organizations in other states.
Frequently asked questions about EFTC in Alabama
Does Alabama participate in EFTC?
Yes. Governor Kay Ivey has opted Alabama into the program, making Alabama families eligible for scholarships when the program begins on January 1, 2027.
Who is the governor of Alabama and what is their position on EFTC?
Governor Kay Ivey (Republican) has opted the state in.
Can Alabama residents donate to an SGO and claim the federal tax credit?
Beginning January 1, 2027, any U.S. taxpayer can claim a federal income tax credit of up to $1,700 per tax return for donations to a qualifying Scholarship Granting Organization, regardless of the state they live in. Alabama residents can give to SGOs in Alabama and the scholarships will fund Alabama students.
When does the EFTC program begin?
The Educational Choice for Children Act program begins on January 1, 2027. Donations made on or after that date are eligible for the federal tax credit. Each participating state's governor must submit a list of qualifying Scholarship Granting Organizations to the U.S. Treasury by January 1 of each participating year.
Becoming an SGO in Alabama
To operate as a Scholarship Granting Organization (SGO) in Alabama under the federal Education Freedom Tax Credit, an organization must meet the §25F requirements that apply in every participating state, plus anything Alabama adds on top. Here is the current picture.
How Alabama opted in: Gov. Ivey's executive advance election (Executive Order 742, January 2026)
Federal requirements (apply in every state)
- Be a 501(c)(3) nonprofit that is not classified as a private foundation.
- Spend at least 90% of the income you receive on scholarships, the remaining 10% is the only budget for all administration, including fundraising.
- Award scholarships to 10 or more students who attend more than one school.
- Do not earmark or reserve contributions for a specific, named student.
- Serve students in households at or below 300% of area median gross income.
- Appear on your state's certified SGO list, which the state submits to the U.S. Treasury.
Alabama-specific requirements
- May only fund scholarships for students in Alabama.
- Must be certified by ALDOR before participating.
ALDOR has published its six certification criteria but says it is awaiting additional guidance from the U.S. Treasury before finalizing application deadlines.
Sources: Alabama Department of Revenue: The Education Freedom Tax Credit Program
Full walkthrough: how to start an SGO. The intake, income verification, receipting, and disbursement a compliant program needs can run on software built specifically for the §25F workflow.
Scholarship Granting Organizations in Alabama
10 Scholarship Granting Organizations currently serve Alabama through state tax-credit scholarship programs and national networks, the organizations most likely to administer the federal EFTC here once official §25F lists are certified.
Browse SGOs in Alabama →Other states with the same status
States that have also opted in.
Recent Alabama EFTC / FSTC news
Coverage of Alabama’s Federal Scholarship Tax Credit decisions and developments.
Learn more about EFTC
In-depth guides on how the program works, who qualifies, and how to participate.
- The real obstacle isn't politics, it's adoptionOnce a state opts in and the program is live, the question that decides whether the Education Freedom Tax Cred…
- Get the credit in your paycheck, not the refundMost people assume a January 2027 donation means waiting until the April 2028 refund to see the $1,700 back, r…
- The CPA's guide to §25FA practitioner's reference to IRC §25F (the EFTC / ECCA / FSTC): the $1,700 dollar-for-dollar credit, why it w…
- Year-end planning: which December mattersThe Education Freedom Tax Credit takes effect January 1, 2027, which turns the usual year-end playbook upside …
- The EFTC, explained for your communityA plain-language, forward-it-to-anyone explainer of the new federal scholarship tax credit: what it is (up to …
- Designating your gift to a schoolSection 25F bans earmarking a donation for any particular student, and that ban is exactly as wide as it sound…
Thank Governor Ivey for opting Alabama in
A short note of thanks from a constituent goes a long way, and reinforces that participation matters to families in your state.
Contact Governor Ivey →
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