How much is the federal scholarship tax credit?

Section 25F allows a nonrefundable credit of up to $1,700 per taxpayer per year for cash contributions to a qualifying Scholarship Granting Organization, with a five-year carryforward. Whether married couples filing jointly are limited to $1,700 or allowed $3,400 has not been settled; Treasury and IRS materials say "up to $1,700", and the regulations are expected to resolve it.

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. Participating states must submit their SGO lists to Treasury before then; the exact deadline will be set by forthcoming regulations.

For CPAs and financial advisors

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

Starting with gifts made on or after January 1, 2027, clients can claim a federal credit for cash contributions to Scholarship Granting Organizations in states that opt in — 30 states so far. This guide separates what the statute settles from what is still waiting on Treasury's regulations.

Last reviewed September 25, 2026 against 26 U.S.C. §25F, Rev. Proc. 2026-6, and Treasury's June 2026 guidance preview.

One-page client handout State opt-in tracker

At a glance

Credit: Nonrefundable federal income-tax credit, up to $1,700 per taxpayer per yearWhether a joint return is limited to $1,700 or allowed $3,400 is not settled until Treasury issues regulations.
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 income, does not allow earmarking, and appears on its state's list.

Most participating states have not yet published their lists; the submission deadline will be set by Treasury's regulations. Until then, 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.

What Treasury has not settled yet

Treasury's regulations were expected in 2026 and have not been published as of September 25, 2026. Until they are, treat these as open:

The per-return amount for married couples filing jointly ($1,700 or $3,400).
The deadline and format for states to submit their 2027 SGO lists.
How SGOs will verify income and document contributions for donors' returns (Treasury's preview mentions a unique donor identifier and an IRS SGO portal).
Whether states that have not elected yet can still join for 2027 when they submit a list.

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?
For married clients: revisit the per-return amount once Treasury’s regulations settle the joint-return question.

Frequently asked questions

How much is the federal scholarship tax credit?: Section 25F allows a nonrefundable credit of up to $1,700 per taxpayer per year for cash contributions to a qualifying Scholarship Granting Organization, with a five-year carryforward. Whether married couples filing jointly are limited to $1,700 or allowed $3,400 has not been settled; Treasury and IRS materials say "up to $1,700", and the regulations are expected to resolve it.
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. Participating states must submit their SGO lists to Treasury before then; the exact deadline will be set by forthcoming regulations.

Share this with clients

A one-page summary you can print or save as PDF and hand to clients, with the same facts and sources.

Open the client handout

This guide is for information only and is not tax, legal, or investment advice. Rules may change when Treasury publishes regulations; confirm current guidance before advising clients.