The new federal scholarship tax credit is one of the most significant education funding opportunities in years—designed to help families pay for private school tuition, tutoring, and other qualified education expenses.
If Pennsylvania participates, this program could unlock new scholarship funding for thousands of students across the state.
What Is the Federal Scholarship Tax Credit?
Under Internal Revenue Code § 25F, individual taxpayers can receive a federal tax credit of up to $1,700 per year for contributions to approved scholarship-granting organizations.
Key features:
- Available to individual taxpayers (not businesses)
- Dollar-for-dollar federal tax credit (not just a deduction)
- Annual cap of $1,700 per taxpayer
- Applies to contributions made to qualified scholarship organizations
This program is expected to take effect beginning in 2027 (for tax years after 2026).
Who Qualifies for Scholarships?
The law defines “eligible students” broadly.
Students qualify if they:
- Are eligible to attend a public elementary or secondary school
- Come from households earning up to 300% of area median income
This means a large percentage of families may qualify for scholarship support.
What Can Scholarships Be Used For?
Scholarship funds can be used for a wide range of qualified education expenses, including:
- Private school tuition
- Tutoring and academic support
- After-school and enrichment programs
- Education technology and learning tools
In addition, scholarships received are not taxable income, increasing their real value to families.
How Scholarship Organizations Qualify
To participate in the program, scholarship-granting organizations must meet strict federal requirements:
- Must be a 501(c)(3) nonprofit organization
- Must spend at least 90% of funds on scholarships
- Must verify student eligibility and household income
- Must maintain separate accounts for contributions
- Cannot earmark donations for specific students
These rules are designed to ensure compliance, transparency, and broad access.
Does Pennsylvania Participate?
The federal program requires states to opt in.
For Pennsylvania families to benefit, the state must:
- Approve participation in the program
- Submit a list of eligible scholarship organizations to the IRS
If Pennsylvania does not opt in, taxpayers may still be able to claim the federal credit—but it is not yet clear whether those funds can be used to support Pennsylvania students. Additional IRS guidance is expected.
How to Access Scholarships in Pennsylvania
Organizations like Friends of Education have extensive experience administering scholarship programs under Pennsylvania’s existing tax credit framework.
As federal guidance is released, organizations like Friends of Education are expected to qualify as Scholarship Granting Organizations under the new law and play a central role in:
- Administering scholarships to eligible students
- Ensuring compliance with federal statutory requirements
- Connecting families and donors with available opportunities
Contact Us
If you are interested in the federal scholarship tax credit, want to understand eligibility, or are considering participating as a donor or family, we’re here to help.
Contact Friends of Education to:
- Learn how the program works
- Determine eligibility
- Explore donation and tax credit opportunities
- Stay informed as federal guidance is released
For additional information or specific inquiries, please contact us directly at:
Friends of Education
