The Education Freedom Tax Credit, explained

You'll see this credit called several things. The Education Freedom Tax Credit is Treasury's name, adopted in June 2026. The Federal Scholarship Tax Credit (FSTC) is the IRS's name, and the one on IRS forms and pages. The Educational Choice for Children Act (ECCA) was the bill's name in Congress. Section 25F, or §25F, is where it sits in the tax code. The One Big Beautiful Bill Act, or OBBBA, is the law that enacted it on July 4, 2025. They all mean the same credit. On this site we say "the federal credit" and cite §25F. (Source: P.L. 119-21 §70411, Treasury press release, June 10, 2026)

The law lets an individual taxpayer take a credit against federal income tax equal to what they gave in cash to a qualifying SGO during the year, up to $1,700. The credit is non-refundable, carries forward five years, and can't be combined with a charitable deduction for the same dollars. The SGO must be on a list its state submits to Treasury, must spend at least 90% of its income on scholarships, must serve at least ten students at more than one school, and can't earmark donations for a named student. (Source: 26 U.S.C. §25F(a), (b), (d), (e), (f))

There's no income limit for donors, and you don't have to itemize. There's also no national cap on the program in the statute. Every eligible taxpayer can claim up to $1,700, however many people donate. (Source: §25F(a), (b))

• Not a deduction. A deduction lowers the income you're taxed on. This lowers the tax itself. Credit vs deduction
• Not refundable. It can bring your federal income tax to zero, not below. The rest carries forward. (Source: §25F(f))
• Not for businesses. Only individuals who are US citizens or residents can claim it. (Source: §25F(a))
• Not a voucher. The money comes from private donations, not a state budget.
• Not taxable to families. Scholarships from an SGO aren't income to the student or the family. (Source: §139K)

Students who are eligible to enroll in a public K-12 school and whose household income for the prior calendar year is at or below 300% of area median gross income, the same measure used for the federal low-income housing credit and published by HUD each year by county and household size. That threshold covers most working families. Scholarships can pay for tuition, fees, tutoring, books, supplies, uniforms, transport, technology, test fees and services for students with disabilities. They aren't taxable to the family. (Source: §25F(c)(2), §530(b)(3)(A), §139K)

A state joins by having its governor, or an official designated under state law, file an advance election with the IRS and submit a list of qualifying SGOs to Treasury by January 1 each year. As of September 14, 2026, 30 states had filed. Donors in any state can donate and claim the credit. Scholarships reach students in joined states. Every state's status (Source: §25F(g), Rev. Proc. 2026-6, IRS FSTC program page)

A state's choice is for one calendar year at a time. A state that stays out in 2027 can join for a later year, and one that joins has to send a fresh list every year. (Source: §25F(c)(1), (g)(1))

The statute settles the $1,700 cap, the start date, cash only, the five-year carryforward, the no-double-benefit rule and the 300% income test. Treasury said it would propose rules by the end of September 2026, and that states, SGOs and taxpayers could rely on them for 2027. (Source: Treasury guidance preview, June 9, 2026)

Still open: whether a married couple filing jointly gets one $1,700 or two, the exact acknowledgment and IRS claim form, and how some ways of paying, such as donor-advised funds and IRA distributions, are treated. We'll update our guides when the rules are published.

Donations before January 1, 2027 earn no federal credit, so the first real deadline is December 31, 2027. Families should check that their child's school is a CEN partner well before then. Donors can pledge now and donate on January 1. (Source: P.L. 119-21 §70411(c))

Donors: How donors claim the credit. Families: Who qualifies. Schools: Registering your school.