A reader asked us for “something I can share,” a plain explanation of the new federal scholarship credit that would make sense on a school parent list or a community group chat. This is that page. No tax jargon in the body, just the six questions people actually ask. Forward it freely.
TL;DR
- Starting in 2027, the federal government will give you back up to $1,700 of your federal income tax, dollar for dollar, when you donate to an approved K-12 scholarship organization. Under Treasury’s proposed rules, a married couple can get up to $3,400 if each spouse gives.
- It’s not a deduction. A $1,700 gift means $1,700 less tax. Your donation funds scholarships for local kids, and it effectively costs you nothing.
- Each state chooses every year whether to join. Check yours at eftccredit.com/states.
What is it?
Congress created a new federal tax credit for people who donate to K-12 scholarship organizations. These are nonprofits that collect donations and turn them into scholarships for students from families earning up to three times their area’s median income (Treasury estimates that covers about 95% of American children), covering things like tuition, tutoring, books, and special-needs services.
Here’s the part worth reading twice. This is a credit, not a deduction. A deduction saves you a slice of what you gave. This credit gives you back the full amount, dollar for dollar, up to $1,700 a year per person. Donate $1,700, and your federal tax bill drops by $1,700. The money you would have sent to Washington goes to scholarships in your community instead.
When does it start?
Donations start counting on January 1, 2027. You would then claim the credit when you file your 2027 federal return, in early 2028, on a new IRS form (Form 8525) that hasn’t been released yet. Treasury published the detailed rules on October 1, 2026. They are still proposed, not final, but Treasury says donors can rely on them for gifts made in 2027.
A gift made in 2026 does not qualify, so if you’re moved to give today, know that the credit only attaches to donations made on or after that date. Between now and then, the useful move is to learn whether your state is participating and which scholarship organizations serve your community.
Do I qualify?
Almost certainly, yes. The credit is open to individual taxpayers who are U.S. citizens or residents. You don’t need to itemize, you don’t need a high income, and you don’t need kids in school. Three practical notes:
- The gift must be cash (including check, card, bank transfer, or an after-tax payroll deduction), given by you personally to a scholarship organization on a participating state’s approved list. Stock, property, and cryptocurrency don’t count, and neither does a gift made through a business partnership or S corporation you own.
- Say it’s for the credit when you give. Under Treasury’s proposed rules, you have to tell the organization at the time of the gift that it’s meant for the federal credit, and that choice can’t be changed later.
- You need a federal income tax bill to offset. The credit reduces tax you owe; it isn’t a check in the mail. If your credit is bigger than your tax bill, the extra rolls forward to future years (up to five).
One thing people mix up: these are the rules for donors. Scholarship recipients are chosen separately by the scholarship organizations, based on household income limits. If you’re wondering whether your own family could receive a scholarship, that’s a different question with its own answer: who qualifies for a scholarship.
Does my state count?
Each state decides every year whether to participate, usually through its governor, and the roster is still moving. As of this writing, the IRS’s official list and our own tracker agree at 30 states, with New York having announced participation without yet filing its federal paperwork. States have until January 1, 2027 to sign up for 2027 and until February 15, 2027 to send in their lists of approved organizations. Rather than trust any number in a forwarded article, check your state directly:
And if your state hasn’t joined? You can still claim the credit. The state decision controls which students can receive scholarships (they have to live in a participating state), not who can donate. Treasury’s proposed rules confirm you can give to an approved organization in any participating state, wherever you live. Your gift would simply support students in a state that has joined, which is also a good reason to ask your governor to opt in.
How do I actually do it?
Four steps, none of them hard:
- Find a scholarship organization on your state’s approved list (or a participating state’s list). Many communities will have one connected to their local schools. The IRS will also publish a national list, and under Treasury’s proposed rules you can generally rely on it: if the organization is on the IRS list when you give, you can treat it as an approved organization.
- Give, and say it’s for the credit. Any cash amount works, on or after January 1, 2027 (the credit tops out at $1,700 per person). Tell the organization when you give that the gift is for the federal tax credit.
- Keep the acknowledgment. By January 31 of the next year, the organization sends you a written receipt that includes a donor number. That number is how the IRS matches your gift to your credit, and it means you never give the organization your Social Security number.
- Claim the credit on your federal tax return for that year, using IRS Form 8525. The form asks for the donor number from each organization you gave to, so don’t lose it. If you use an accountant or tax software, hand over the acknowledgment and you’re done.
Can I support MY school?
This is usually the question behind all the other questions, and the answer is yes, at the school level. Many scholarship organizations let you direct your gift toward a specific partner school’s scholarship fund, so your community’s giving supports your community’s families.
What nobody can do is pick the student. The law is strict here: no donor can earmark money for a particular child, including their own. The scholarship organization always decides which eligible students receive awards. Choose the destination, not the recipient. Treasury’s October 2026 proposed rules repeat the ban on directing money to a particular student and don’t address school-level designation, so ask the organization how it handles a gift meant for your school.
What’s the catch?
There’s no trapdoor, but three honest fine-print items:
- It offsets tax you owe; it’s not a refund check. If your credit exceeds your federal income tax for the year, the unused portion carries forward for up to five years rather than being paid out.
- No double-dipping. The part of a donation you claim this credit for can’t also be claimed as a charitable deduction. You get the credit, which is the better deal anyway. If you give more than the credit covers (say $2,000), the extra $300 may still be deductible under the usual charitable rules.
- State credits come off your gift first. If your state also gives you a tax credit for the same donation, that amount is subtracted from your gift before the $1,700 limit applies. Under Treasury’s proposed rules, a $2,500 gift that earns a $500 state credit still gets the full $1,700 federal credit. A $2,000 gift with a $400 state credit gets $1,600. Either way, you never get back more than you gave.
Share this page
This page was written to be forwarded. Send the link to your school’s parent list, your congregation’s email, or the community WhatsApp, or print it and pin it to the bulletin board. Sharing it is not a small thing: the biggest risk to this credit isn’t politics, it’s whether people actually claim it, and a trusted local messenger is what moves a neighbor from “interesting” to “done.” The address is easy to pass along:
And for whether your state is in: eftccredit.com/states
If you want a heads-up when your state’s status changes or new guidance lands, the free weekly newsletter covers exactly that, in the same plain language as this page. The signup form is at the bottom of this page.
For the detail-minded: the program is the Education Freedom Tax Credit, codified at IRC §25F, enacted in July 2025. The full statutory text is archived at /documents/section-25f, Treasury’s October 2026 proposed rules are summarized at /documents/treasury-proposed-regulations, the donor-number mechanics are explained at /learn/25f-donor-number, and the school-designation rules at /learn/designating-gifts-to-schools.
Frequently asked questions
Is this a deduction or a credit?
A credit, and that's the whole point. A deduction lowers the income you're taxed on, which saves you a fraction of what you gave. This credit lowers your actual tax bill by the full amount of your gift, up to $1,700. Give $1,000, owe $1,000 less.
Do I have to give the full $1,700?
No. Any cash amount works. $1,700 is just the most one person can claim in a year. A $100 gift gets you a $100 credit.
What about married couples filing jointly?
Each spouse counts separately. Under Treasury's proposed rules, released in October 2026, a married couple filing jointly can claim up to $3,400, because each spouse's own gift counts toward their own $1,700. The simplest way to do it is two gifts, one from each spouse, each marked for the credit when it's made. The rules aren't final yet, but Treasury says families can rely on them for gifts made in 2027.
Can I pick which student gets the scholarship?
No. The law bars donors from directing money to a particular student, including their own children. You can often direct your gift to a specific school's scholarship fund, but the scholarship organization always decides which eligible students receive awards.
Does my child's school need to be private or religious?
Scholarships can support students at private and faith-based schools, and the covered expenses reach further than tuition: Treasury's examples include tutoring, books, computers, and special-needs services, with a detailed federal list still to come. What matters most is where your family lives: scholarships go to students who live in a participating state, and the school can even be in another state. States that join can't limit which kinds of schools scholarship students attend, and under Treasury's proposed rules the scholarship organization pays tuition directly to the school.
Where can I check if my state is in?
eftccredit.com/states tracks every state and DC, updated as governors act. That's the fastest way to see where your state stands today.
