Charitable Giving Tax Strategies for 2027: Where the Scholarship Tax Credit Fits

What Changed for Charitable Giving Starting in 2026

The 2025 tax law, often called the One Big Beautiful Bill Act, changed several charitable giving rules beginning January 1, 2026. Here are the main changes:

• A deduction for people who do not itemize. Taxpayers who take the standard deduction can deduct up to $1,000 in cash gifts to public charities, or up to $2,000 for married couples filing jointly. Gifts to donor-advised funds do not count.
• A floor for people who itemize. Itemizers can deduct charitable gifts only above 0.5 percent of their adjusted gross income.
• A cap on the value of the deduction for top earners. For taxpayers in the 35 percent or 37 percent bracket, the tax benefit of the deduction is figured at 35 percent.
• A permanent 60 percent limit. The limit on cash gifts to public charities stays at 60 percent of adjusted gross income.

These rules apply to the deduction. The scholarship credit is separate, and it starts with gifts made on or after January 1, 2027.

Credit vs. Deduction: Why the Difference Matters

A deduction lowers the income you are taxed on, so its value depends on your tax bracket. A credit lowers your tax bill itself. For example, a $1,700 deduction for someone in the 24 percent bracket saves about $408 in tax. A $1,700 credit reduces the tax owed by up to $1,700, as long as you owe at least that much. A credit also does not depend on whether you itemize, since it applies to your tax bill instead of your deductions.

Where the Scholarship Tax Credit Fits

The federal scholarship tax credit gives eligible donors up to $1,700 per year in credit, or up to $3,400 for married couples filing jointly, for cash gifts to a qualified scholarship granting organization (SGO). It is nonrefundable, and unused credit carries forward for up to five years. A few rules shape how it works alongside your other giving:

• One gift, one benefit. You cannot claim the credit and a charitable deduction for the same dollars. Any amount above what the credit covers may be deductible if it meets the usual deduction rules.
• Cash only. The credit applies to cash gifts. Digital assets do not qualify.
• State credits come first. If a state credit applies to the same gift, it reduces the amount that counts toward the federal limit.
• Qualified organizations only. The gift has to go to an SGO that is approved in a state that opted in.

• $1,700Cap for an individual filer
• $3,400Cap for married couples filing jointly
• 5 yearsUnused credit carries forward

Charitable Giving Strategies to Consider for 2027

The right plan depends on your income, your tax bill, and the causes you care about. These ideas can help you think it through with your tax professional.

• Estimate your 2027 tax bill early. The credit only helps up to the amount of federal income tax you owe, so your expected tax sets a practical ceiling.
• Treat the credit as one part of your giving. You can still support your church, local charities, and other causes. Think of the scholarship credit as a separate piece with its own limit.
• Time your gift. Only gifts made on or after January 1, 2027 qualify for the credit. Gifts made in 2026 will not.
• Decide how to handle any extra. If you plan to give more than the credit covers, ask your tax professional whether the extra amount may be deductible and how the 2026 deduction rules apply to you.
• Plan for carryforward. If your tax bill is smaller than your credit, the unused amount can carry forward for up to five years, so a smaller bill does not mean the gift is wasted.
• Keep good records. The SGO gives you a unique donor number and an acknowledgment by January 31 of the following year, and you will use that donor number when you file.

A Simple Example

Say a married couple filing jointly expects to owe $8,000 in federal income tax in 2027. In February, they give $3,400 in cash to an approved SGO. Their credit can reduce the tax they owe by up to $3,400, bringing the bill to about $4,600 before any other credits. Gifts they make to their church or other charities are handled separately under the normal deduction rules.

What to Watch Before You Give

• Proposed rules. Treasury released proposed regulations on October 1, 2026, and a public hearing is set for December 15, 2026. Details can change before the rules are final. You can read Treasury's overview on the Treasury Department website (opens in a new tab).
• State participation. States decide whether to take part, so check the current list before you give. Our donor guide explains how state participation works.
• Your own situation. A tax professional can look at your income, deductions, and goals together.

Quick Answers

Can I claim the credit and a deduction for the same gift?

No. The same dollars cannot count for both.

Do I need to itemize to use the scholarship credit?

No. It is a credit against your tax, not a deduction.

Does the credit replace my other charitable giving?

No. It is an additional option with its own limit.

Plan Ahead for 2027

Charitable giving tax strategies work best when you start early. Learn how the credit works in our donor guide, then get notified when giving opens, and we will send the key dates and steps.

This article is general information, not tax advice. Check with a tax professional about your situation.

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