Tax-Credit Scholarship
Federal Tax Credits for Scholarships
For the first time in history, the U.S. Congress has enacted a federal tax credit for individuals’ contributions to nonprofit organizations distributing K–12 education scholarships. Included in the sweeping One Big Beautiful Bill Act, the federal “Individual Tax Credit for Qualified Contributions to Scholarship Granting Organizations” (FTCS) represents a notable milestone in the decades-long effort to broaden educational opportunity for American families.
Signed into law in July 2025 and effective January 1, 2027, section 25F of the Internal Revenue Code will allow individual taxpayers to receive a dollar-for dollar federal income tax credit for donations made to Scholarship Granting Organizations (SGOs) that meet federal requirements.
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Enacted:2025
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Launched:2027
Program Stats
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>83%
Students Eligible -
$1,700
Dollar-for-dollar tax credit up to $1,700 per taxpayer, starting January 1, 2027
Program Summary
The Federal Tax Credits for Scholarships (FTCS) offers tax credits to individuals supporting SGOs. These SGOs determine scholarship amounts, which may vary depending on the SGO to which a student applies for a scholarship. Tax credits are worth 100% of the value of the contributions to the SGOs. Starting in tax year 2027, individual taxpayers who contribute to SGOs may claim a dollar-for-dollar credit of up to $1,700. This credit is not available to corporations. Students are eligible for the FTCS if they are eligible to enroll in a public elementary or secondary school and are a member of a household that made less than 300% of the area median gross income the prior year.
Funded Eligibility: Dependent on amount of donations and average scholarship size
Funding Mechanism: Private donors fund this program by donating to SGOs. They receive federal tax credits of up to $1,700 for their donation.
Honorable Mention Fact: This is the second national school choice initiative created by Congress that includes private educational choice.
More Info: Head to this page to keep up on the latest news and information on this program.
(Last updated December 16, 2025)
Use of Funds
Qualifying scholarship expenses include elementary and secondary school tuition and fees, academic tutoring, special needs services, books, supplies and other equipment incurred in connection with enrollment or attendance as an elementary or secondary school student at a public, private, or religious school. Other qualified expenses include, uniforms, transportation, supplementary items and services (including extended day programs), which are required or provided in connection with the school where the child is enrolled or attends. Computer technology or equipment and internet access, predominantly educational in nature and to be used during the years the child is in school, are also eligible expenses.
(Last updated July 10, 2026)
Program Guidelines
Before January 1, each state’s governor (or other individual, agency, or entity as is designated under state law to make such elections on behalf of the state with respect to federal tax benefits) must provide the United States Secretary of Treasury with a list of eligible SGOs.
- Income Limit: 300% x Area Gross Median Income
- Prior Year Public School Requirement: None
- Enrollment Cap: None
- Budget: None
- Scholarship Cap: None
- Testing Mandates: None
- Credit Value: 100%
- Per Donor Credit Cap: $1,700
- Special Needs Pathway: None
Participant and Family Guidelines
- Education Requirements: N/A
- Parent Supplemented Funds/Scholarships: Allowed
- Miscellaneous: N/A
Scholarship Organization Guidelines
- Must provide scholarships to 10 or more students who do not all attend the same school
- Must spend at least 90% of income on scholarships for eligible students
- Cannot provide scholarships for any expenses other than qualified elementary and secondary expenses
- Must prioritize students who received a scholarship the previous year, then siblings of scholarship recipients
- Cannot earmark contributions for individual students
- Must verify family income annually and only award scholarships to eligible students