Frequently Asked Questions
Get answers to common questions about school choice and our resources
What is the federal scholarship tax credit?
The federal scholarship tax credit is a new program under Internal Revenue Code § 25F that allows individual taxpayers to receive a dollar-for-dollar tax credit of up to $1,700 per year for contributions to qualified scholarship-granting organizations.
Who is eligible for the federal scholarship tax credit?
The credit is available to individual taxpayers who make qualifying cash contributions to approved scholarship organizations. It is not available to businesses or corporations.
When does the federal scholarship tax credit start?
The program is expected to begin for tax years after 2026, meaning taxpayers can first claim the credit on returns filed for 2027.
Who qualifies for scholarships under the program?
Students are eligible if they:
- Are eligible to attend a public elementary or secondary school
- Come from households earning up to 300% of area median income
This broad definition allows many middle-income families across the country to qualify.
What expenses can scholarships cover?
Scholarships can be used for a wide range of qualified education expenses, including:
- Private school tuition
- Tutoring and academic support
- After-school programs
- Educational technology and learning tools
Scholarships received are not taxable income to the student or family.
How do scholarship organizations qualify?
To participate, scholarship-granting organizations must:
- Be a 501(c)(3) nonprofit organization
- Spend at least 90% of funds on scholarships
- Verify student eligibility and household income
- Maintain separate accounts for contributions
- Not earmark donations for specific students
Do states need to participate in the federal scholarship program?
Yes. The program requires states to opt in by submitting a list of approved scholarship-granting organizations to the IRS.
Without state participation, scholarship organizations in that state may not be able to participate directly in the program.
Can I still claim the credit if my state does not opt in?
Possibly—but the rules are not yet fully clarified. It remains uncertain whether contributions must be directed to scholarship organizations in participating states. Additional IRS guidance is expected.
How can I participate as a donor?
Individual taxpayers can participate by making qualifying contributions to approved scholarship organizations and claiming the federal tax credit (up to $1,700 annually).
Who should I contact for more information?
For questions about eligibility, donations, or scholarship opportunities, contact Friends of Education or email:
Friends of Education