Federal Scholarship Program FAQ

It is a new federal tax credit designed to generate private contributions for K–12 scholarships.

Beginning in 2027, taxpayers can receive a federal income-tax credit for contributions to Scholarship Granting Organizations, or SGOs. Those organizations use the contributions to provide scholarships for eligible K–12 students.

The program is broader than private-school tuition. Eligible students can include children attending public schools, private schools and other educational settings.

1. A state elects to participate.
2. The state identifies qualified Scholarship Granting Organizations.
3. Taxpayers make cash contributions to SGOs and receive a federal income-tax credit.
4. Eligible families apply to SGOs for scholarships.
5. SGOs award scholarships to eligible students.
6. Scholarship funds are used for qualified K–12 educational expenses.

The program begins January 1, 2027. The credit becomes available for qualified contributions beginning that date.

No. Participation is voluntary. A state or the District of Columbia must elect to participate and provide the IRS with a list of qualified SGOs.

As of September 2026, 30 states have made advance elections to participate in 2027.

The IRS will maintain information on participating states and qualified organizations.

Families interested in participating should first determine whether their state has elected to participate, then identify participating SGOs serving students in their state.

A student must meet two basic requirements:

• The student must be eligible to enroll in a public elementary or secondary school.
• Household income for the previous calendar year generally cannot exceed 300 percent of area median gross income.

The income limit is based on local area median income and household size, so there is no single national dollar cutoff.

Under the proposed regulations, Treasury and the IRS estimate that approximately 96 percent of children in participating states would be eligible under the income rules and safe harbors.

Household income for the previous calendar year generally cannot exceed 300 percent of area median gross income.

Because the limit depends on local area median income and household size, there is no single national dollar cutoff.

No. The limit is 300 percent of area median income, not 300 percent of the federal poverty level. Many middle-income families will therefore qualify.

Yes. A student does not have to leave public school to receive a scholarship.

That is an important feature of the program. An eligible student can remain in a public school and use scholarship funds for qualified expenses outside the regular school program, including academic tutoring and, depending on the circumstances, books and supplies, computers and internet access, special-needs services and other qualified expenses.

Yes. Scholarships can pay qualified expenses associated with enrollment or attendance at a private or religious school, including tuition and fees.

Homeschool students can qualify if they satisfy the federal definition of an eligible student. Whether a particular homeschool expense qualifies depends on the nature of the expense and, in some cases, whether it is connected to enrollment or attendance at a school as defined under federal and state law.

A microschool student can qualify as an eligible student. Whether tuition or other expenses charged by a particular microschool qualify can depend on how the microschool is organized and whether it is treated as a school under applicable law.

Families should check with the SGO before incurring an expense.

Yes. Qualified expenses can include special-needs services, subject to the federal requirements governing those expenses.

Yes, provided each child meets the eligibility requirements and receives an award from an SGO.

Federal law defines qualified expenses by reference to the existing federal rules for Coverdell Education Savings Accounts. Depending on the circumstances, qualified expenses can include:

• tuition and fees
• academic tutoring
• special-needs services
• books
• supplies
• educational equipment
• computer technology and equipment
• internet access and related services
• uniforms
• transportation
• room and board
• supplementary items and services, including extended-day programs

Different requirements apply to different expenses. Some expenses must be incurred in connection with a student’s enrollment or attendance at a public, private or religious school, while others have their own statutory requirements.

Yes, if the tutoring is a qualified educational expense.

For example, an eligible seventh grader could remain enrolled in her local public school while receiving scholarship assistance for qualifying math tutoring after school.

Yes, when the books and supplies satisfy the requirements for qualified K–12 educational expenses.

Yes, subject to the federal requirements. Federal law expressly includes computer technology or equipment, and internet access and related services, if they are used by the student and the student’s family while the student is in school.

Computer technology can include computers, peripheral equipment and software. Software designed for sports, games or hobbies does not qualify unless it is predominantly educational.

Yes. Internet access and related services are expressly included among qualified expenses when the statutory requirements are met.

Yes. Special-needs services for an eligible student with special needs can be qualified expenses, subject to the applicable federal requirements.

Certain extended-day programs can qualify when they are required or provided by a public, private or religious school in connection with the student’s enrollment or attendance.

That does not mean that every after-school or child-care program automatically qualifies.

Transportation can qualify when it is required or provided by a public, private or religious school in connection with the student’s enrollment or attendance.

Yes. The federal program is not limited to students who leave public schools for private schools.

An eligible child can remain enrolled in a public school and receive scholarship assistance for qualified educational expenses.

Depending on the expense and applicable requirements, a public-school family could use scholarship funds for such things as:

• academic tutoring
• special-needs services
• books and supplies
• educational equipment
• computers, tablets, peripheral equipment and qualifying software
• internet access and related services
• certain supplementary or extended-day services

Yes, if the student qualifies and the tutoring is a qualified expense.

A family does not have to choose between remaining in public school and receiving scholarship assistance. The program can provide additional educational services while the child remains enrolled in his or her existing school.

No. The program does not transfer an appropriation from a public school’s budget to an SGO. Scholarships are funded by private contributions to SGOs for which taxpayers receive federal income-tax credits.

The program could have indirect fiscal effects if it changes enrollment or other spending patterns, and those effects will vary by state and school system.

Yes. Tuition and fees incurred in connection with enrollment or attendance at a private or religious K–12 school are qualified expenses.

Current students can participate. Federal law does not limit scholarships to students entering private school for the first time.

Yes. Federal law expressly includes qualified expenses associated with enrollment or attendance at religious elementary and secondary schools.

No. An SGO raises contributions and awards scholarships. A private school can accept scholarship students without becoming an SGO itself.

The proposed regulations provide that participating states may not impose SGO operating requirements that are more restrictive than those established by Section 25F, including restrictions based on the type of school a scholarship recipient attends or the types of qualified educational expenses an SGO funds.

The proposed rules also would prevent a state from using discretionary certification standards to exclude an otherwise qualifying SGO.

Scholarships are provided by independent nonprofit SGOs using private contributions for which donors receive federal tax credits; they are not direct federal grants to schools.

Private schools should nevertheless review applicable federal rules, state law and SGO participation requirements before accepting scholarship payments.

Yes, if the child satisfies the federal eligibility requirements.

The more important question is whether a particular expense qualifies. Some qualified expenses are expressly connected to enrollment or attendance at a public, private or religious school, so homeschool families should confirm the eligibility of a particular expense with their SGO.

Federal law defines qualified expenses by reference to the existing Coverdell Education Savings Account rules. Some categories are tied to enrollment or attendance at a school, while others have their own requirements.

For items such as curriculum, online courses, outside classes or co-op fees, confirm with your SGO that the particular expense and your child’s educational circumstances satisfy the applicable requirements before you buy.

Computer technology, equipment and internet access are qualified expense categories under federal law. Families should confirm with the SGO that the particular expense and the student’s educational circumstances satisfy the applicable requirements.

It can if the expense qualifies under federal law. Because microschools operate under different legal structures from state to state, families should determine whether a particular microschool and expense satisfy the applicable requirements before enrolling on the assumption that scholarship funds will cover the cost.

No. Scholarship Granting Organizations administer the scholarship funds.

Payment procedures will be established by SGOs consistent with federal requirements. Providers should consult participating SGOs about registration, documentation, invoicing and payment procedures.

A scholarship may pay for qualifying academic tutoring. Whether a particular tutoring arrangement qualifies depends on the federal expense rules and the circumstances of the service.

Teachers and families should confirm eligibility with the SGO before arranging services on the assumption that scholarship funds will pay for them.

An individual taxpayer can claim a nonrefundable federal income-tax credit of up to $1,700 for qualified cash contributions to eligible SGOs.

Under the proposed regulations, married taxpayers filing jointly may claim a combined credit of up to $3,400.

The credit can reduce a taxpayer’s federal income-tax liability, but it cannot generate a refund beyond the taxpayer’s tax liability.

Yes. Unused Section 25F credits can generally be carried forward for up to five years.

It is a tax credit.

A taxpayer cannot also claim the same contribution as a federal charitable deduction if the Section 25F credit is allowed for that contribution.

Federal law reduces the Section 25F credit by the amount allowed as a credit on the taxpayer’s state tax return for the same qualified contribution.

The proposed regulations provide additional ordering rules governing the interaction between state and federal credits.

Under the proposed regulations, taxpayers may contribute to an eligible SGO regardless of their state of residence. The SGO must use qualified contributions for scholarships for eligible students in a state in which it is properly listed.

No. Federal law prohibits an SGO from earmarking or setting aside a donor’s contribution for a particular student.

Section 25F is an individual income-tax credit. It is not a corporate income-tax credit.

No. Qualified contributions must be made in cash.

An SGO is generally a qualifying Section 501(c)(3) public charity that receives contributions and awards scholarships to eligible K–12 students.

Among other federal requirements, an SGO must:

• provide scholarships to at least 10 students who do not all attend the same school
• use at least 90 percent of its income for scholarships for eligible students
• award scholarships only for qualified K–12 educational expenses
• verify student income eligibility
• give required priority to returning scholarship students and then siblings of previous recipients
• maintain qualified contributions separately from other funds
• not earmark contributions for particular students

Participating states identify qualified SGOs and submit their lists to the IRS.

The proposed regulations would also prevent a state from using discretionary certification standards to exclude an otherwise qualifying SGO.

Yes. The proposed regulations establish a framework for multistate SGOs.

They also provide an operational safe harbor for qualifying organizations whose activities are at least 85 percent scholarship-granting activities. Treasury and the IRS estimate that the safe harbor could allow approximately 450 additional organizations to participate and increase qualified contributions by as much as $3 billion annually.

The proposed and temporary regulations establish reporting, verification and audit requirements intended to prevent duplication, improper payments and fraud.

These include IRS portals for states and SGOs, annual SGO reporting and audits, separate accounting for qualified contributions, unique donor numbers that avoid requiring SGOs to collect donors’ Social Security numbers, and procedures for removing organizations that fail to meet federal requirements.

Treasury and the IRS estimate that by 2030 the Education Freedom Tax Credit could support:

• 600 to 700 Scholarship Granting Organizations
• more than 11 million contributing taxpayers
• nearly $26 billion in qualified contributions each year
• as many as 2.2 million scholarships annually

These are federal estimates, not guaranteed funding or participation levels. Actual participation will depend on the number of participating states and SGOs, taxpayer contributions and family demand.

The credit becomes available for qualified contributions beginning January 1, 2027.

Participating states must identify qualifying SGOs and submit their lists to the IRS. SGOs will then establish their scholarship application and payment procedures and begin accepting contributions and applications according to their schedules.

Families interested in participating should first determine whether their state has elected to participate, identify participating SGOs serving students in their state, review the SGO’s scholarship requirements and eligible expenses, and apply directly to the SGO.