How much is the federal scholarship tax credit?

Section 25F allows a nonrefundable credit of up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly) for cash contributions to a qualifying Scholarship Granting Organization, with a five-year carryforward, under Treasury and IRS proposed regulations announced October 1, 2026.

Can clients in a state that has not opted in claim the credit?

Section 25F ties the credit to the SGO appearing on a participating state's list, not to where the donor lives. A client in a non-participating state can give to an SGO listed by a participating state. Confirm the SGO's listing before the client gives.

Can a client claim both a state SGO credit and the federal credit?

Not for the same dollars in full. The federal credit is reduced by any state tax credit claimed for the same contribution (§25F(b)(2)), and no charitable deduction is allowed for the credited amount (§25F(e)). Plan state and federal gifts separately and confirm how the SGO will receipt each.

For CPAs and financial advisors

Education Freedom Tax Credit: A Guide for CPAs and Financial Advisors

Clients can claim a federal credit for a cash gift made on or after January 1, 2027 only if the state has filed its election and submitted its SGO list, and only for an SGO on that list — 32 states are opted in so far. The credit is up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly).

This guide is for information only and is not tax advice.

Last reviewed October 1, 2026 against 26 U.S.C. §25F, Rev. Proc. 2026-6, and Treasury's June 2026 guidance preview, and Treasury's October 1, 2026 announcement of the proposed regulations.

One-page client handout State opt-in tracker

At a glance

Credit: Nonrefundable federal income-tax credit, up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly)
Qualifying gift: Cash contribution to a Scholarship Granting Organization (SGO) on a participating state’s list
First eligible gifts: Made on or after January 1, 2027 (taxable years ending after December 31, 2026)
Carryforward: Unused credit carries forward up to 5 years
State credit interaction: The federal credit is reduced by any state tax credit claimed for the same contribution (§25F(b)(2))
Charitable deduction: None for the amount credited (§25F(e))
Earmarking: Not allowed — the SGO cannot let donors direct gifts to a particular student

Who can claim it

The credit follows the organization, not the donor's home state. A contribution qualifies when the SGO is on the list a participating state submits to Treasury, so a client in a state that has not opted in can still claim the credit by giving to an SGO listed by a participating state.

Because the credit is nonrefundable, it only offsets federal income tax the client owes. Any unused amount carries forward for up to five years.

How it interacts with state SGO credits

Many states run their own scholarship tax credit programs. The federal credit is separate, but §25F(b)(2) reduces it by any state tax credit the taxpayer claims for the same contribution, and §25F(e) allows no charitable deduction for the credited amount.

In practice, treat state and federal gifts as separate decisions. Each SGO must keep federal contributions in a separate account, and an organization that runs a state program does not qualify for the federal credit automatically — it must meet §25F's requirements and appear on its state's list. Ask the SGO how it will receipt a gift to its §25F account.

See each state's status, and whether it also has a state program, on the state tracker.

Choosing an eligible SGO

A qualifying SGO is a 501(c)(3) public charity (not a private foundation) that keeps §25F contributions in a separate account, spends at least 90% of its income on scholarships, awards scholarships to at least 10 students who do not all attend the same school, verifies that recipients' household income is at or below 300% of area median gross income, does not allow earmarking, and appears on its state's list.

Most participating states have not yet published their lists. For 2027, a state must file its election by January 1, 2027 (11:59 p.m.) and submit its SGO list by February 15, 2027. If the state does not submit that list, no SGO in that state qualifies. Until those lists are published, confirm directly with an SGO that it has applied to be listed, and check the IRS list of participating states. You can browse SGOs by state in the SGOlist directory.

Joint returns

On October 1, 2026, Treasury and the IRS issued proposed regulations for section 25F. The credit is up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly).

Companion temporary regulations cover procedures for state elections, Scholarship Granting Organization registration, and donor acknowledgements. Taxpayers, states, and SGOs may rely on the proposed regulations for qualified contributions beginning January 1, 2027. The announcement is Treasury's October 1, 2026 release. Comments on the proposed regulations (REG-117199-25), and requests to speak at the hearing, are due December 1, 2026. Requests to attend are due December 10, 2026 (5 p.m. ET). The public hearing is December 15, 2026 at 10 a.m. ET. Proposed regulations, Federal Register, October 2, 2026.

Client conversation checklist

Is the client’s federal tax liability large enough to use a nonrefundable credit, or will some carry forward?
Does the client already give to a state SGO or scholarship tax credit program? Plan which gifts claim which credit, since the federal credit is reduced by a state credit claimed for the same contribution.
Is the SGO on a participating state’s list for 2027? Ask the SGO for written confirmation once lists are submitted.
Will the SGO receipt the gift to its separate §25F account, and what documentation will it provide for the return?
Is the gift cash, made on or after January 1, 2027, and not earmarked for a particular student?
The credit is up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly).

Frequently asked questions

How much is the federal scholarship tax credit?: Section 25F allows a nonrefundable credit of up to $1,700 per taxpayer ($1,700 single, $3,400 married filing jointly) for cash contributions to a qualifying Scholarship Granting Organization, with a five-year carryforward, under Treasury and IRS proposed regulations announced October 1, 2026.
Can clients in a state that has not opted in claim the credit?: Section 25F ties the credit to the SGO appearing on a participating state's list, not to where the donor lives. A client in a non-participating state can give to an SGO listed by a participating state. Confirm the SGO's listing before the client gives.
Can a client claim both a state SGO credit and the federal credit?: Not for the same dollars in full. The federal credit is reduced by any state tax credit claimed for the same contribution (§25F(b)(2)), and no charitable deduction is allowed for the credited amount (§25F(e)). Plan state and federal gifts separately and confirm how the SGO will receipt each.
When can clients start giving?: Contributions made on or after January 1, 2027 can qualify. For 2027, a state must file its election by January 1, 2027 (11:59 p.m.) and submit its SGO list by February 15, 2027. If the state does not submit that list, no SGO in that state qualifies.

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This guide is for information only and is not tax, legal, or investment advice. The credit amounts follow the October 1, 2026 proposed regulations. Confirm current guidance before advising clients.