The credit becomes law

On July 4, 2025, Public Law 119-21 added section 25F to the tax code. It gives individual taxpayers a credit of up to $1,700 a year, dollar for dollar, for cash donations to a scholarship granting organization. It started life in Congress as the Educational Choice for Children Act. (Source: §25F(a), (b)(1))

For donors

Any US citizen or resident can claim it. There's no income limit, and you don't have to itemize. The credit equals the cash you donate during the year, up to $1,700. It's non-refundable, so it can take your federal income tax to zero but not below. Any credit you can't use carries forward for up to five years. (Source: §25F(a), (b)(1), (f))

Two rules stop the same dollar counting twice. If you claim the credit, you can't also claim a charitable deduction for that same donation. And you can't claim a federal and state tax credit on the same funds, so a state credit needs its own, separate donation. (Source: §25F(b)(2), (e))

For families

Scholarships go to K-12 students who are eligible to enroll in a public school, in households at or below 300% of their area's median income for the year before they apply. They can pay for tuition, fees, books, supplies, uniforms, transport, tutoring, technology and services for students with disabilities. They aren't taxable income for the family. (Source: §25F(c)(2), (c)(4), §530(b)(3)(A), §139K)

Students who had a scholarship the year before come first. Their brothers and sisters come next. Donors can't earmark a donation for a named student. (Source: §25F(d)(1)(D), (E))

For the organizations

A scholarship granting organization must be a 501(c)(3) public charity. It must keep credit donations in a separate account, spend at least 90% of its income on scholarships, serve ten or more students who don't all attend one school, and check each family's income. (Source: §25F(c)(5), (d)(1))

States choose

The credit only reaches students in states that opt in. A state joins for a calendar year when its governor, or an official state law designates, elects to take part and sends Treasury a list of qualifying organizations. (Source: §25F(c)(1), (g))

When it starts

The credit applies from the 2027 tax year. Donations made from January 1, 2027 count. Treasury and the IRS will write the detailed rules. (Source: P.L. 119-21 §70411(c), §25F(h))

Which schools it covers

The law doesn't limit a scholarship to one kind of school. Qualified expenses follow the rules for Coverdell education savings accounts, which cover students at public, private and religious K-12 schools. That includes Christian schools. (Source: §25F(c)(4), §530(b)(3)(A))

Since then, and what's next

Treasury asked for public comment in Notice 2025-70 in November 2025. Revenue Procedure 2026-6 set how states opt in, and states could file from January 1, 2026. As of September 14, 2026, 30 states are on the IRS list. In June 2026 Treasury previewed its rules and named the program the Education Freedom Tax Credit, with proposed rules expected by the end of September 2026. Donations start on January 1, 2027. December 31, 2027 is the last day for the 2027 return, and the IRS claim form is expected in early 2028. (Source: IRS FSTC program page)