In July 2025, a federal law created something that has never existed before: a dollar-for-dollar federal tax credit for donations that fund K–12 scholarships. It starts January 1, 2027. This page covers what it is, how it works, and what it means for you, whichever side of it you’re on.
The Education Freedom Tax Credit (26 U.S.C. §25F) lets any individual taxpayer donate up to $1,700 a year to a qualified Scholarship Granting Organization, a registered 501(c)(3) like JEFA, and receive the full amount back as a credit against their federal income tax. The SGO turns those donations into scholarships for K–12 students from households within 300% of their area’s median income, and pays schools directly.
Step 1: A donor gives
Up to $1,700, to a qualified SGO.
Step 2: The SGO awards a scholarship
To an eligible student.
Step 3: The school is paid
Tuition, tutoring, books and more.
Step 4: The donor claims the credit
The full amount, dollar for dollar, when they file.
Reduces your taxable income.
The saving is a fraction of the gift. A $1,700 deduction in the 24% bracket saves about $408.
Reduces the tax itself.
$1,700 of credit saves $1,700, at any income.
The credit is non-refundable: it can bring your federal tax to zero, but not below. Anything you can’t use carries forward for up to five years.
Each state decides two things.
Whether to join.
The governor opts in each year by sending the Treasury a list of approved SGOs. Without that, no scholarships can be awarded in the state.
How closely to oversee SGOs.
Some states add their own reporting rules.
What that means in practice
A donor in any state can give and claim the credit. A family can only receive a scholarship if their state has joined.
| July 2025 | The credit becomes federal law |
|---|---|
| October 1, 2026 | Treasury releases proposed regulations |
| Q4 2026 | Pledges and pre-registration |
| January 1, 2027 | First day a donation qualifies |
| February 15, 2027 | State SGO lists due to Treasury |
| Mid-2027 | Family applications open, school by school |
| 2028 | Credit claimed on 2027 federal returns (Form 8525) |
Individual U.S. taxpayers. Businesses can give, but can’t claim this credit. Married couples can each give $1,700 and claim $3,400 on a joint return.
Money (cash, check, card, bank transfer or payroll deduction) given to a qualified SGO on or after January 1, 2027. Stock, crypto, business gifts and donations earmarked for a named student don’t qualify.
Not on the same donation. The law prevents a double benefit.
Yes. The credit reduces the tax you owed across the year, so your refund grows by the amount you gave.
Under current law, the credit applies against both regular tax and AMT.
K–12 students in households at or below 300% of area median income, in states that have joined. An estimated 90% of American students fall under the income line.
No. The law excludes them from income.
The SGO, under federal priority rules: returning students first, their siblings second, then other eligible families. Donors may choose a school but never a student.
No. It’s charity: voluntary donations to independent nonprofits. No federal conditions attach to a school’s curriculum, mission or beliefs.
Important information
Nothing on this site is tax, legal or financial advice; it’s general information only. Talk to your tax professional about your own situation before you donate or claim a credit. JEFA is an independent 501(c)(3) nonprofit, not affiliated with or endorsed by the IRS, the U.S. Department of the Treasury, the U.S. Department of Education or any state or local government. Treasury’s regulations are proposed, not final, and details may change when they are finalized. The credit is non-refundable and depends on your own federal tax liability and on whether your state has elected to take part. A donation does not guarantee a scholarship for any family.