What the Education Freedom Tax Credit pays for: the §530 qualified-expense list

Most descriptions of the federal Education Freedom Tax Credit (also called ECCA or the Federal Scholarship Tax Credit, FSTC) treat it as a private-school tuition program. That is one use of scholarship funds, not the definition of the program. §25F borrows its expense list wholesale from an existing statute, and that list is considerably broader than tuition.

How §25F defines a qualified expense

§25F(c)(4) is short: a “qualified elementary or secondary education expense” is “any expense of an eligible student which is described in section 530(b)(3)(A).” Rather than writing a new definition, Congress pointed to the expense list already used for Coverdell education savings accounts (§530), a decades-old savings vehicle for K-12 and college costs. You can read the full text of §25F and the §530(b)(3) expense text directly.

What Treasury’s October 2026 rules add

Treasury’s proposed regulations, released October 1, 2026, which taxpayers, SGOs, and states may rely on for 2027 contributions, did not write an expense list either. Proposed § 1.25F-1(a)(14) defines a qualified expense as one “described in section 530(b)(3)(A) and any guidance thereunder,” and § 1.25F-1(a)(17) gives “school” the §530(b)(3)(B) meaning (a school providing K-12 education “as determined under State law”) “and any guidance issued thereunder.” The same definition of school applies to the rule that an SGO fund 10 or more students who do not all attend the same school.

The detail is coming in a separate document. In the preamble, Treasury says it has received many comments asking for guidance under §530(b)(3) on “the meaning of qualified expenses and schools” and intends “to issue that guidance as soon as possible so that taxpayers may rely on it,” treating it as “a high priority.” As of October 1, 2026, that guidance has not been issued, so the category-by-category readings below rest on the statutory text.

Treasury’s own announcement gives examples in the meantime. The press release lists “private-school tuition, academic tutoring, special-needs services, books, supplies, computers and other equipment, and other qualifying expenses connected with a student’s enrollment or attendance.” The fact sheet adds tutoring for students attending a local public school, special education services for students with disabilities, and “qualifying extended day programs.”

Other rules shape what actually gets funded:

• States cannot narrow the list. Under Treasury’s temporary regulations (T.D. 10057), a participating state “may not require SGOs to operate in a manner that is more restrictive than” §25F, “such as by limiting the type of school that scholarship recipients may attend or the types of qualified elementary or secondary education expenses for which scholarship funds may be used.”
• SGOs can narrow their own focus. The preamble says an SGO may limit its scholarships to specific subject areas “such as science or foreign languages,” or to lower-income households, and still qualify. An SGO that funds only tutoring is making the same kind of choice.
• The charity rules still apply. The preamble says the §530(b)(3)(A) cross-reference provides “the outer boundaries of qualified expenses” and that an SGO, as a 501(c)(3) public charity, “must award scholarships only for those expenses that are reasonably necessary to further the organization’s charitable exempt purposes.” Treasury has asked for comments on how those charity rules interact with §25F.

Our news coverage of the one national standard for SGOs explains the state limits in more detail.

The core list: tuition, tutoring, books, special-needs services

§530(b)(3)(A)(i) covers expenses “incurred in connection with the enrollment or attendance” of the student as a K-12 student at a public, private, or religious school:

• Tuition and fees
• Academic tutoring
• Special needs services, for a special-needs student
• Books, supplies, and other equipment

This is the plainest, least ambiguous part of the list, and the part Treasury’s own October 2026 examples lead with. “Fees” may be broad enough to reach standardized testing fees (SAT, ACT, AP, state assessments), but the statute does not name testing fees individually and Treasury’s examples do not mention them, so confirm the specific fee with your SGO rather than assuming, and watch for the §530 guidance.

Room, board, uniforms, and transportation (a narrower category)

§530(b)(3)(A)(ii) adds a second category that is easy to over-read:

• Room and board
• Uniforms
• Transportation
• Supplementary items and services, including extended-day programs

Treasury’s fact sheet lists “qualifying extended day programs” among its examples without spelling out what makes one qualify; until the §530 guidance arrives, the statutory test is the “required or provided by” qualifier above. The proposed-regulations preamble also reminds SGOs of the charity rules against private benefit, citing Rev. Rul. 69-175, in which a nonprofit formed by parents to provide school bus transportation for their own children was found to serve a private rather than a public interest.

Computers, internet access, and technology

§530(b)(3)(A)(iii) covers “the purchase of any computer technology or equipment or Internet access and related services,” for use by the student and the student’s family during any year the student is in school. §530(b)(3)(C) further defines “computer technology or equipment” to include computer software, computer or peripheral equipment, and fiber-optic cable related to computer use.

The one written carve-out: software designed for sports, games, or hobbies does not qualify, “unless the software is predominantly educational in nature.” A laptop, home internet service, and educational software are squarely inside the statutory list; a general-purpose game console is not. Treasury’s October 2026 press release names “computers and other equipment” among its examples.

Public-school students can qualify too

Because the §530(b)(3)(A) list is not written around private-school tuition, and §25F eligibility itself turns on the student, not the school, a student enrolled in a public school and living in an income-eligible household can receive scholarship support for tutoring, special-needs services, and technology, without transferring anywhere. Treasury’s October 2026 fact sheet gives “tutoring for students attending a local public school” as an example, and the proposed regulations add an income safe harbor for individual tutoring or special-needs services at schools in low-income areas, when the school selects the students based on need. See EFTC for public-school students for the full argument, and scholarship eligibility for the income and enrollment tests themselves. Today, most SGOs still fund mainly private tuition because they grew out of older state tuition-scholarship programs, not because federal law confines them there.

Homeschool and microschool families

§530(b)(3)(A) ties expenses to enrollment or attendance at a “school,” and §530(b)(3)(B) defines “school” as any school providing K-12 education “as determined under State law.” Treasury’s proposed regulations adopt that definition but do not address homeschools directly, leaving the details to the separate §530 guidance, which has not been issued. Treasury’s June 2026 preview said a home school “would be treated as a school if it is treated as a school under State law,” but the proposed regulations do not repeat that statement, so treat the homeschool question as still open. Under the statutory text, whether homeschooling counts as school attendance is a state-by-state question, not a single national answer. Some states have homeschool statutes that satisfy this; some effectively fold homeschooling into private-school law; others do not formally treat it as school enrollment at all. That turns on how state law defines a school; a state cannot use its §25F role to limit the type of school scholarship students attend. On that statutory reading, curriculum, tutoring, and technology could be covered where state law treats the home school as a school and the SGO funds the model, if the §530 guidance agrees; transportation and uniforms are a weaker fit outside a school setting for the reason described above. Read EFTC for homeschool and microschool families and the state-by-state homeschool breakdown before assuming your state works the way a neighboring state does.

Services for students with disabilities

“Special needs services in the case of a special needs beneficiary” sits in the same clause as tuition and tutoring, meaning it is one of the core, directly-named categories, not an edge case, and Treasury’s October 2026 announcement lists special-needs services as an example. The category is commonly read to cover occupational, physical, behavioral, and speech-language therapies, assistive technology, and specialized instruction; who counts as a special needs beneficiary, and exactly which services qualify, are for Treasury’s pending §530 guidance. A formal diagnosis or IEP is not required to be an eligible student, though many SGOs prioritize special-needs applicants or run dedicated funding streams for them. Two parts of the proposed regulations matter here. For awards based on need for special-needs services, priority “can be based on need for the services” rather than on renewal or sibling status. And students a school in a low-income area selects for special-needs services can skip the household income check, if the SGO gets an annual third-party audit confirming, among other things, that each student’s need was independently diagnosed by a professional not associated with the provider. See EFTC for special-needs families for the full picture, including how using a scholarship interacts with IDEA and IEP rights.

What is not a qualified expense

The statute is a list of enumerated categories, not a general education-spending account, so expenses outside those categories, or outside the “required or provided by the school” qualifier in clause (ii), are a weak fit. SGOs and Treasury’s pending §530 guidance will draw finer lines (the October 2026 proposed regulations did not), but based on the statutory text alone, expect these to fall outside the list:

• Family trips or outings framed as “field trips”
• General-purpose consumer electronics or gaming software not predominantly educational
• Everyday clothing or transportation the school does not require or provide
• Food, outside a school-required room-and-board arrangement
• Medical-only treatment unrelated to a child’s education, or durable medical equipment for non-educational use

None of these categories appear in §530(b)(3)(A), and an SGO that funded them would risk its own compliance with §25F(d)(1)(C), which bars scholarships for “any expenses other than qualified elementary or secondary education expenses.”

How the money gets paid

Whether an expense qualifies is one question; how the SGO pays for it is another, and Treasury’s proposed regulations (proposed § 1.25F-3(c)(5)) answer the second one:

• School charges go to the school. Tuition, fees, room and board, and similar expenses charged by the school must be paid directly to the school, and the school must return any overpayment or payment made in error.
• Other vendors can be paid directly if the SGO has verified the vendor as an appropriate provider, the vendor is not related, directly or indirectly, to the student, and the vendor must return overpayments.
• Families get money only as a reimbursement. The family provides a receipt showing the payment was made and the expense qualifies, and the SGO checks that the same expense is not being reimbursed beyond its cost by more than one source.
• Qualified digital wallets are an approved method: a third-party platform where families submit purchase requests, with pre-approved vendors paid directly or receipts required.

The SGO must also run reasonable fraud controls, including systems to stop duplicate awards to the same student for the same expense. See the four ways SGOs can pay and disbursing funds to schools.

Who actually decides what's covered

§530(b)(3)(A), and the §530 guidance Treasury has promised, set the federal ceiling, the outer boundary of what a §25F scholarship is legally allowed to fund. A participating state cannot lower that ceiling for SGOs on its list. The ceiling does not require any single SGO to fund every category on the list. Each Scholarship Granting Organization sets its own covered-expense policy within that ceiling, some fund tuition only, others apply the list broadly. Before assuming a specific expense, tutoring, a laptop, a therapy, homeschool curriculum, is covered, confirm it directly with the SGO you are applying through. You can estimate your household's eligibility first with the scholarship eligibility calculator.

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