Glossary A to Z
The Education Freedom Tax Credit terms you'll see on this site, in plain English. Each one links to the page that uses it most.
A
- Area median gross income (AMGI)
- The middle household income for a county or metro area, as published each year by HUD and used in the federal low-income housing credit. The scholarship income limit is 300% of this figure for your household size.
- Who qualifies
- Acknowledgment
- The written receipt CEN SGO sends after a donation, showing date, amount, designated school and your donor number. You need it to claim the credit.
- Your receipt
C
- Carryforward
- Credit you couldn't use this year because you owed less tax than the credit. It carries to the next year, up to five years, oldest first.
- The credit cap
- Covered state
- The IRS's term for a state that has joined the program by filing its advance election and submitting its SGO list.
- States
- Credit
- A dollar-for-dollar reduction in the tax you owe. Different from a deduction.
- Credit vs deduction
D
- Deduction
- A reduction in the income you're taxed on. Worth your tax rate times the amount, and only if you itemize.
- Credit vs deduction
- Designate
- Choosing which partner school your donation supports. Allowed. Different from earmarking.
- Choose a school
- Donor number
- A unique ID on your acknowledgment, generated under an IRS method, that the IRS uses to match your donation to your return. Replaces the need to share your Social Security number.
- Your receipt
E
- Earmark
- Directing a donation to a named student. Not allowed. An SGO that does it loses its status.
- Choose a school
- Education Freedom Tax Credit
- Treasury's name for the federal credit at 26 U.S.C. §25F. Also called the Federal Scholarship Tax Credit (IRS) and the Educational Choice for Children Act (Congress).
- The credit, explained
N
- Non-refundable
- A credit that can reduce your tax to zero but not below. Has nothing to do with whether you get a refund at filing.
- Refund vs liability
- 90/10 rule
- At least 90% of an SGO's income must go to scholarships. The other 10% is the entire budget for everything else.
- Compliance
P
- Partner school
- A Christian K-12 school that has signed CEN SGO's agreement and can receive scholarship payments.
- Recommend your school
Q
- Qualified contribution
- A cash donation to an SGO on a covered state's list, not earmarked for a student. The only kind of donation that earns the credit.
- What counts
S
- Scholarship granting organization (SGO)
- A 501(c)(3) that receives tax-credit donations and awards K-12 scholarships under the federal rules. Also called STO, SSO or SFO in some states.
- What is an SGO
- Section 25F
- The part of the tax code that creates the credit. When we cite "§25F" we mean this.
- Sources
- State stacking
- Claiming a state scholarship credit and the federal credit in the same year, with two separate donations so neither is reduced.
- Two credits, two donations