Compare ways to fund
Four tools, four different mechanisms. Most families can use more than one.
Side by side
Four tools, four different mechanisms
| Federal scholarship credit | 529 plan | State ESA | State voucher or scholarship | |
|---|---|---|---|---|
| Who puts money in | Donors, who get it back as a federal credit | Anyone, from after-tax money | The state | The state |
| Who holds it | The SGO, then the school | The account owner | The family's account | Paid to the school |
| Who qualifies | K-12 students, household income within 300% of area median | Any beneficiary | Varies by state | Varies by state, often income-tested |
| Pays for | Tuition, fees, tutoring, books, technology, special-needs services and more | K-12 tuition and other K-12 costs, up to $20,000 a year from 2026 | Varies | Tuition, sometimes fees |
| Federal tax | Credit for the donor. Scholarship not taxable to the family | Growth is tax-free when spent on qualified costs | Varies | Not taxable |
They can stack, but not on the same expense twice.
The tools
How each one works
- The federal scholarship creditDonors give cash to an SGO like CEN and take up to $1,700 off their federal tax. CEN awards scholarships to eligible students and pays the school. Families don't pay into it, and the scholarship isn't income to them. (Source: §25F(a), (c)(2), §139K)
- 529 plansA 529 is a savings account for education. Parents, grandparents and friends can all put money in. Earnings grow free of federal tax when spent on qualified costs. For K-12, the annual limit rose from $10,000 to $20,000 in 2026. The list of K-12 costs also grew beyond tuition, to include things like curriculum, books, tutoring and test fees. State tax treatment varies. (IRS Topic 313)
- State ESAs, vouchers and scholarshipsThese are state programs, paid from state budgets. An education savings account puts state money in an account the family spends on approved costs. A voucher or state scholarship pays a school directly. Who qualifies, how much, and what's covered depend on the state. Your state page has the specifics.
Using more than one
How they stack
A family can receive a federal scholarship, use a 529 for remaining costs, and take part in a state program where one exists. The limit is paying for the same expense twice. Treasury has said states will need steps to stop duplicate awards to the same student for the same expense. A state may also count the federal scholarship when sizing its own award. (Source: Treasury guidance preview, June 9, 2026)
- Step 01
Federal scholarship
Applied first to the family's tuition account at the school.
- Step 02
State program
Covers what its rules allow, and may count the federal award.
- Step 03
529 or family
Pays what's left, without claiming a cost the scholarship already paid.
One way the pieces can fit. Your school's business office and your state's rules decide the order.
Example
Tuition at a family's Christian school is $8,000. A CEN scholarship of $3,000 is paid to the school. A state program covers $2,000 under its own rules. The family pays the last $3,000 from a 529. No dollar of tuition is paid twice. Illustrative figures.
Who it's for
Which tool fits whom
| You are | Tools to look at |
|---|---|
| A donor who wants to help families at a Christian school | The federal credit, plus your state's credit if it has one |
| A grandparent saving for one grandchild | A 529 for that child, and the federal credit for the school |
| A family paying tuition now | A CEN scholarship if you qualify, your state's program, then a 529 or your own funds |
| A family with young children | A 529 now, and a scholarship application when school starts |
For grandparents
A grandparent can fund a grandchild's 529 and also donate to CEN SGO. The 529 is for that one child. The CEN donation supports the school's scholarship fund, and CEN chooses the students. The credit can't be earmarked for a named child. For grandparents (Source: §25F(d)(1)(E))
Worth knowing
Common mix-ups
- “The federal credit is a voucher”It isn't. The money comes from private donations, and an SGO awards it.
- “Donors choose the student”They can choose the school. CEN chooses the students. (Source: §25F(d)(1)(E))
- “Families pay tax on the scholarship”They don't. (Source: §139K)
- “529s only work for college”They've covered K-12 tuition since 2018, and the 2025 law added more K-12 costs.
Where to start
Families: check whether your income is under the limit for your county, and whether your school is a CEN partner. Donors: check how much federal income tax you owe after other credits. Both take a few minutes with the eligibility check and the calculator.
Help
Questions, answered
Do I lose my voucher if I get a scholarship?
A family can receive a federal scholarship and take part in a state program where one exists. The same expense can't be paid twice, and a state may count the federal scholarship when sizing its own award. Your state page has the specifics.
Can I pay the rest from a 529?
Yes. A family can receive a federal scholarship and use a 529 for remaining costs. From 2026, a 529 can pay up to $20,000 a year of K-12 costs. Don't claim a cost the scholarship already covered.
Is the federal scholarship a voucher?
No. It's funded by private donations, not the state.
Is the scholarship taxable?
No. A scholarship from an SGO for qualified K-12 costs isn't income to the family. (Source: §139K)
Can a grandparent's 529 and a CEN donation help the same child?
Yes, in different ways. The 529 pays that child's costs. The CEN donation goes into the school's scholarship fund, and CEN chooses the students. The donor can't direct it to the grandchild. (Source: §25F(d)(1)(E))
My state has no ESA or voucher. Can we still get a federal scholarship?
Yes, if your state has opted in to the federal credit and lists CEN, and your household income is within the limit. The federal scholarship doesn't depend on any state program. (Source: §25F(c)(1), (c)(2))
The full guide has every source.
Read the full guide