The federal scholarship tax credit is non-refundable. That word sounds limiting, and for most donors it is not. This article explains what non-refundable means, who it affects, and why the five-year carryforward keeps your gift from going to waste.
CEN is the mission to put a Christian education within reach for more families. CEN SGO is how that mission moves, by turning a donor’s federal taxes into a scholarship at an Evangelical or Catholic school. Understanding how the credit behaves helps you give with confidence.
What non-refundable means
A tax credit reduces the tax you owe. A non-refundable credit can reduce what you owe all the way to zero, and no further. It will not turn into a check back to you.
Here is the line that matters. If you owe federal income tax, the credit offsets it dollar-for-dollar, up to an annual per-taxpayer limit that will be confirmed once final rules are published. If your credit is larger than the tax you owe in a given year, the part you cannot use does not produce a refund. The IRS describes the federal scholarship tax credit as non-refundable, and the Brownstein tax guide walks through how the math works.
Non-refundable versus refundable
A refundable credit can pay you beyond your tax bill. If a refundable credit is larger than what you owe, the government sends you the difference. A non-refundable credit stops at zero. The federal scholarship tax credit is non-refundable, so it works best as a way to redirect tax you already owe, not as a way to receive money you never paid.
Why this is fine for most donors
For most people who give through CEN SGO, non-refundable is not a problem. The plan is straightforward. You redirect part of what you already owe in federal taxes to a Christian school scholarship. You were going to pay that money anyway. The credit lets it fund a scholarship instead. As long as your gift sits within the tax you owe, the full amount works for you.
The donors who need to plan a little more carefully are those whose gift might exceed their federal tax for the year. That is where the carryforward comes in.
The five-year carryforward
If your credit is larger than the tax you owe this year, you do not lose the unused part. It carries forward for up to five years. You apply it against what you owe in future years until it runs out or the five years pass. The Bipartisan Policy Center explainer and the Brownstein guide both confirm this carryforward.
So a gift that runs ahead of a single year of tax is not wasted. It waits, and it works in the years that follow.
A few related rules
Two more points round out the picture, and both connect to other guides.
You cannot claim a charitable deduction on the same gift you use for the credit. You choose one. [internal: Tax credit, not tax deduction: why the difference matters] explains why the credit is usually the better choice.
The federal credit is also reduced by any state scholarship credit you claim on the same gift, so the federal and state pieces do not simply add up. [internal: How the SGO credit works alongside your state’s scholarship program] shows how they fit together.
When this starts
The credit is not live yet. It applies starting with tax year 2027, for cash gifts made on or after January 1, 2027. Until then, schools can register and donors can sign up to be notified. For the full mechanics, start with [internal: What is an SGO, and how does the federal tax credit work?].
FAQ
If my credit is bigger than my tax bill, do I get the rest back?
No. A non-refundable credit reduces what you owe to zero but does not pay you beyond that. The unused amount carries forward for up to five years.
How long can I carry forward unused credit?
Up to five years. You apply the carryover against future federal tax until it is used or the five years end.
Does non-refundable mean I lose money if I give too much?
Not for five years. Any portion you cannot use this year carries forward. A good CPA can help you size a gift to your tax liability.
Plan your gift
A short conversation with your CPA makes the timing and amount easy to get right. Talking to your CPA about year-end giving through the SGO has the questions to ask. When you are ready, Get notified and we will reach you the day the 2027 window opens. See the Donors page for more, or Resources for every guide in one place.