People use “credit” and “deduction” as if they mean the same thing. They do not. The difference decides how much your gift is worth, and with the new federal scholarship tax credit, the difference works strongly in your favor.
CEN exists to put a Christian education within reach for more families. CEN SGO is how that happens, by connecting your federal taxes to a scholarship at an Evangelical or Catholic school. This article explains why we always say tax credit, and never let “deduction” stand in for it.
A deduction lowers your taxable income
A charitable deduction reduces the income the government taxes. If you give to a charity and deduct it, your taxable income drops by the amount of the gift. Your actual savings depend on your tax bracket, so you recover only a fraction of what you gave. A deduction helps. It never makes a gift cost-free.
A credit lowers your tax bill directly
A tax credit is different. It comes off the tax you owe, not the income you are taxed on. The federal scholarship tax credit is dollar-for-dollar, up to an annual per-taxpayer limit that will be confirmed once final rules are published. Dollar-for-dollar means a gift to CEN SGO reduces what you owe the federal government by the same amount.
That is the heart of the redirect. You are sending part of what you already owe to a Christian school scholarship instead of the federal general fund. Same money, different destination. The IRS confirms the credit is claimed against federal income tax owed, and the Bipartisan Policy Center explainer describes it as a non-refundable credit of up to an annual per-taxpayer amount.
Why the difference matters to you
Put the two side by side and the gap is clear.
With a deduction, you give and recover part of it through a lower tax bill. The gift still costs you real money out of pocket.
With the federal scholarship tax credit, you redirect part of what you already owe. Within the annual limit, the scholarship is funded and your out-of-pocket cost is nothing beyond what you owed in the first place. You were going to pay that money to the federal government. Now it can fund a Christian education instead.
This is why we say “redirect” rather than “give.” A redirect costs nothing extra. It is the most disarming fact in the whole story, and it is true because this is a credit, not a deduction.
One rule to remember
You cannot claim both. The law does not let you take a charitable deduction and the federal scholarship tax credit on the same gift. You choose one. For most donors with federal tax to pay, the credit is the better choice by a wide margin, because it reduces the bill dollar-for-dollar rather than reducing taxable income. The Brownstein tax guide lays out this no-double-dip rule in detail.
There is one more wrinkle worth knowing. The federal credit is reduced by any state credit you claim on the same gift, so the two do not simply stack. [internal: How the SGO credit works alongside your state’s scholarship program] explains how the federal and state pieces fit together.
When the credit applies
The federal scholarship tax 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. The credit is also non-refundable, which has its own implications worth understanding before you give. [internal: What is a non-refundable tax credit?] covers that.
FAQ
Can I take both the credit and the deduction?
No. The law does not allow a charitable deduction and the federal scholarship tax credit on the same gift. You choose one, and for most donors the credit is worth more.
Is the credit dollar-for-dollar?
Yes, up to an annual per-taxpayer limit that will be confirmed once final rules are published. Within that limit, a gift reduces what you owe by the same amount.
Does my state tax credit stack on top of the federal one?
Not fully. The federal credit is reduced by any state credit claimed on the same gift. See our guide on working alongside your state program for the details.
Talk to your advisor
The mechanics reward a quick conversation with a CPA before year-end. Talking to your CPA about year-end giving through the SGO gives you the questions to bring. When you are ready, Get notified and we will reach you the day the 2027 giving window opens. The Donors page has more, and Resources holds the full set of guides.