Public Law 119-21 · §70411(a)(1) · enacted July 4, 2025
§25F. Qualified Elementary and Secondary Education Scholarships
Note, October 1, 2026: the statutory text below is unchanged. Treasury’s proposed and temporary regulations now interpret it; see the subsection-by-subsection pointers after (h).
(a)Allowance of credit
In the case of an individual who is a citizen or resident of the United States (within the meaning of section 7701(a)(9)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified contributions made by the taxpayer during the taxable year.
(b)Limitations
(1)In general
(2)Reduction based on State credit
(c)Definitions
For purposes of this section,
(1)Covered State
(2)Eligible student
The term “eligible student” means an individual who,
(3)Qualified contribution
(4)Qualified elementary or secondary education expense
(5)Scholarship granting organization
The term “scholarship granting organization” means any organization,
(i)is described in section 501(c)(3) and exempt from tax under section 501(a), and
(ii)is not a private foundation,
(d)Requirements for scholarship granting organizations
(1)In general
An organization meets the requirements of this subsection if,
(i)students awarded a scholarship the previous school year, and
(ii)after application of clause (i), any eligible students who have a sibling who was awarded a scholarship from such organization,
(i)verifies the annual household income and family size of eligible students who apply for scholarships to ensure such students meet the requirement of subsection (c)(2)(A), and
(ii)limits the awarding of scholarships to eligible students who are a member of a household for which the income does not exceed the amount established under subsection (c)(2)(A).
(2)Prohibition on self-dealing
(A)In general
(B)Disqualified person
(e)Denial of double benefit
Any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section 170.
(f)Carryforward of unused credit
(1)In general
(2)Limitation
(g)State list of scholarship granting organizations
(1)List
(A)In general
(B)Process
(2)Certification
(h)Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance,
(1)
(2)
Where Treasury’s October 2026 regulations interpret this text
Our annotations, not part of the statute. “Prop.” sections are proposed regulations (REG-117199-25): not final, but taxpayers, SGOs, and states may rely on them for qualified contributions made on or after January 1, 2027. “T” sections are temporary regulations (T.D. 10057), which take effect without a comment period and apply from September 1, 2026.
- (a) The credit is nonrefundable, is allowed against regular tax and the alternative minimum tax, and counts only gifts made while the donor is a U.S. citizen or resident (prop. § 1.25F-2(a)(1)). A partner’s or S corporation shareholder’s share of the entity’s gift does not count (prop. § 1.25F-2(a)(3)).
- (b)(1) Spouses filing jointly are treated as separate taxpayers, so a joint return can claim up to $3,400 when each spouse makes and designates their own gift (prop. § 1.25F-2(a)(2)).
- (b)(2) A state credit for the same gift is subtracted before the $1,700 cap: a $2,500 gift with a $500 state credit still yields the full $1,700 (prop. § 1.25F-2(c)).
- (c)(3) A qualified contribution is cash (including after-tax payroll deduction, not digital assets) that the donor designates as a §25F contribution when making it (§ 1.25F-1T(a)(12)). “Solely within the State” means the student resides in that state, wherever the school is (prop. § 1.25F-3(c)(7)).
- (c)(4) and (d)(1)(A) Qualified expenses and the meaning of “school” both follow §530(b)(3) and forthcoming §530 guidance, not yet released (prop. § 1.25F-1(a)(14) and (17)).
- (c)(5) “Located in” a state means authorized to do business there and in compliance with its general charity laws (§ 1.25F-1T(a)(10)). The separate account becomes a §25F segregated account holding only qualified contributions and their earnings (prop. § 1.25F-3(b)(2)).
- (d)(1)(B) “Income of the organization” is total gross receipts, unreduced by expenses, spent by the end of the following taxable year. An SGO whose activities are at least 85% scholarship granting may apply the test to its §25F account instead (prop. § 1.25F-3(c)(2) and (c)(4)).
- (d)(1)(F) Income is verified directly, through a recent SNAP, TANF, WIC, Section 8, or SSI award letter, through a safe harbor for tutoring and special-needs awards at schools in low-income areas, or automatically for foster children (prop. § 1.25F-3(c)(6)).
- (d)(2) Disqualified persons include substantial contributors (more than $5,000 and more than 2% of the year’s contributions), officers and directors, anyone who helps select recipients, and their families (prop. § 1.25F-3(d)).
- (e) The part of a gift that earns no credit may still be deductible under §170 (prop. § 1.25F-2(f)).
- (f) Unused credit carries forward five years, oldest first (prop. § 1.25F-2(e)).
- (g) For 2027, a state files Form 15714 by January 1, 2027 and its SGO list by February 15, 2027; in later years the list window runs October 1 to January 1. The list must include every qualifying organization located in the state that seeks inclusion (§ 1.25F-5T(c)).
