Turn Your Tax Credits Into Life-Changing Scholarships
Beginning in 2027, eligible individual taxpayers may claim a federal tax credit of up to $1,700 for qualifying cash contributions to approved Scholarship Granting Organizations. Friends of Education is preparing to participate in this new program and help expand educational opportunities for eligible K–12 students.
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About Section 25F
The federal government has established a new scholarship tax credit under Section 25F of the Internal Revenue Code to support qualified K–12 educational scholarships.
Enacted in July 2025, Section 25F allows eligible individual taxpayers to claim a federal income tax credit for qualifying cash contributions to approved Scholarship Granting Organizations, or SGOs. Qualifying contributions may begin January 1, 2027, and the annual credit is limited to $1,700.
Friends of Education is preparing to pursue qualification under Section 25F. If we are included on an applicable participating state’s list of qualified SGOs, we plan to help connect qualifying contributions with scholarships for eligible K–12 students.
WHY US
Why Follow Friends of Education for Section 25F?
Friends of Education brings experience with scholarship tax-credit programs and is preparing for the new federal Section 25F program with a focus on clear guidance, responsible administration and educational opportunity.
Preparing for SGO Qualification
We are preparing to meet the federal requirements for Scholarship Granting Organization status and to pursue inclusion on an applicable participating state’s qualified SGO list.
Up to $1,700 Federal Credit
Beginning in 2027, an eligible individual may claim a federal credit for qualifying contributions, up to the $1,700 annual limit and subject to the taxpayer’s federal tax liability and other applicable rules.
Scholarships for Students
Qualified contributions will fund scholarships for eligible K–12 students within the state where the participating SGO is listed.
Clear Donor Guidance
We are preparing clear contribution procedures, donor documentation and recordkeeping processes designed around the federal program requirements.
Tax-Credit Experience
Our team has experience helping Pennsylvania taxpayers support educational organizations through the Commonwealth’s existing EITC tax-credit program.
Compliance-Focused Approach
We are preparing the financial controls, scholarship procedures, reporting systems and documentation needed to operate responsibly under Section 25F.
HOW IT WORKS
How the Federal Scholarship Tax Credit Works
Here is the basic process established under Section 25F for qualifying contributions…
Step 1
A State Participates
A state elects to participate in Section 25F and submits its list of qualified Scholarship Granting Organizations. An organization must be included on that list for qualifying contributions to it to generate the federal credit.
Step 2
You Make a Qualifying Contribution
Beginning in 2027, an eligible individual makes a qualifying cash contribution to an approved SGO. The contribution must be used to fund scholarships for eligible students in the state where the SGO is listed.
Step 3
The SGO Provides Documentation
The qualified SGO records the contribution and provides the donor documentation required under the applicable federal guidance.
Step 4
Scholarships Are Awarded
The SGO independently awards scholarships to eligible K–12 students for qualified elementary and secondary education expenses under Section 25F.
Step 5
The Donor Claims the Credit
The donor reports the qualifying contribution on the appropriate federal income tax return and may claim an available credit of up to $1,700, subject to federal tax liability and other applicable limitations.
Maximum Annual Federal Scholarship Tax Credit
Up to $1,700
The credit generally equals the qualifying contribution, subject to the $1,700 annual limit, federal tax liability and other applicable limitations.
Cash Contributions
A state must elect to participate and identify qualified SGOs before contributions to those organizations can qualify for the federal credit.
Participating States
Qualified contributions fund scholarships for eligible students and qualified elementary and secondary education expenses.
K–12 Scholarships
OUR EXPERIENCE
Pennsylvania Tax-Credit Experience
FAMILIES
Benefits for Families
Broad Eligibility
Eligible students generally must be from households with income no greater than 300% of the applicable area median gross income and must be eligible to enroll in a public elementary or secondary school.
Verified Eligibility
Qualified SGOs must verify household income and family size to determine whether scholarship applicants meet federal eligibility requirements.
Educational Options
Scholarships may help eligible families access qualified K–12 educational expenses that fit their child’s educational needs.
Qualified Expenses
Scholarships may cover qualified expenses such as tuition, tutoring, special-needs services, books, supplies, equipment and certain other eligible K–12 education costs.
Renewal Priority
Section 25F requires qualified SGOs to give priority to eligible students who received a scholarship from the organization during the previous school year, followed by eligible siblings of scholarship recipients.
Special Needs Support
Qualified educational expenses may include certain special-needs services for eligible students when the applicable requirements are satisfied.
DONORS
Benefits for Donors
Up to $1,700 Federal Credit
Eligible individuals may claim a credit for qualifying contributions of up to $1,700 per year, subject to federal tax liability and other applicable limitations.
Five-Year Carryforward
An unused Section 25F credit may generally be carried forward for up to five succeeding tax years, subject to the federal rules.
Contribution Documentation
Qualified SGOs will be responsible for maintaining contribution records and providing donor documentation required under applicable federal guidance.
Federal Requirements
Section 25F establishes requirements for qualified SGOs involving scholarship administration, financial controls, student eligibility, recordkeeping and state listing.
Scholarship Decisions Remain Independent
Contributions cannot be earmarked or set aside for a particular student. Scholarship awards must be made independently by the qualified SGO according to its written procedures and the applicable federal requirements.
FAQ
Frequently Asked Questions
Get answers about Section 25F, donor eligibility, student eligibility, and participating states.
What is the federal scholarship tax credit?
Section 25F provides eligible individual taxpayers with a federal income tax credit for qualifying cash contributions to approved Scholarship Granting Organizations. The annual credit is limited to $1,700.
Who is eligible for the federal scholarship tax credit?
The credit is available to eligible U.S. citizen or resident individual taxpayers who make qualifying cash contributions to qualified SGOs. Section 25F is an individual federal income tax credit rather than a corporate tax credit.
When does the federal scholarship tax credit start?
Qualifying contributions may begin January 1, 2027. A qualifying contribution made during 2027 would generally be reported on the taxpayer’s 2027 federal income tax return, normally filed in 2028.
Who qualifies for scholarships under the program?
An eligible student generally must:
• Be eligible to enroll in a public elementary or secondary school; and
• Be a member of a household whose income for the preceding calendar year does not exceed 300% of the applicable area median gross income.
Actual scholarship availability will also depend on the qualified SGO’s application process, available scholarship funding and applicable program requirements.
Do states need to participate in the federal scholarship program?
Yes. A state must elect to participate in Section 25F and submit its list of qualified Scholarship Granting Organizations for contributions to organizations on that list to qualify for the federal credit.
If a state does not participate, organizations located in that state cannot qualify through that state for Section 25F contributions for that calendar year.