Do I Qualify for the Education Freedom Tax Credit?

1. Does your state's opt-in affect you as a donor?

No. Eligible donors in every state can give and claim the federal credit, whether or not their home state has opted in, as long as they give to a federally approved SGO in a participating state. Where you live does not decide whether you qualify.

What the opt-in decides is where scholarship recipients live. A state must notify the U.S. Department of Education that it wants to participate before families and students there can receive scholarship funds. As of October 22, 2026, 30 states have opted in.

The states that have opted in are: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

If your state is not on that list, you can still give and claim the credit. Your gift simply supports scholarships for students in states that have opted in, through an SGO that serves them.

More states may opt in over time. See the full state-by-state guide for the current list and updates.

2. Is your gift the right type?

Not every kind of charitable gift qualifies for this credit. The law is specific: you must give cash to a qualified SGO. Here is what counts and what does not:

• Cash gifts qualify. This includes checks, electronic transfers, and credit card payments made directly to the SGO.
• Gifts of stock do not qualify. Even if you give appreciated stock to an SGO, the gift does not count toward the Education Freedom Tax Credit.
• Gifts of property do not qualify. Real estate, vehicles, and other non-cash property are excluded.
• Digital assets do not qualify. Cryptocurrency and other digital assets are specifically excluded from this credit.
• Donor-advised fund distributions do not qualify. A grant from a donor-advised fund to an SGO does not count as a qualifying gift for this credit because the gift came from the fund, not directly from you.

If you want to give appreciated stock, you may still benefit from a charitable deduction, but you cannot use the stock gift to claim the Education Freedom Tax Credit. See the credit vs. deduction guide for a comparison.

3. Is your gift going to a qualified SGO?

Your gift must go to a scholarship granting organization that is qualified under Public Law 119-21. Not every nonprofit that funds private school scholarships will automatically qualify. The SGO must be approved by the state and meet specific requirements in the law.

Treasury and the IRS are expected to publish guidance on which organizations qualify. Until that list is finalized, the safest step is to give to an organization that is already participating in an established state scholarship tax credit program in an opted-in state, and to confirm with the SGO that it expects to be federally qualified before you give.

4. Is your federal tax bill large enough?

The Education Freedom Tax Credit is nonrefundable. That means it can reduce your federal income tax to zero but cannot pay you more than you paid in. If you have tax withheld from your paycheck, a lower bill still means a bigger refund. If your federal tax bill is smaller than the credit, you will not be able to use the full credit in the year you give.

The unused portion is not lost. It carries forward for up to five years and can be applied against future federal tax. So even if your bill is small this year, a larger bill in a future year could let you use the remaining credit.

To estimate whether your bill is large enough, look at the total tax on your most recent federal return. That is the figure before withholding and estimated payments are subtracted. If your total tax is at least as large as the gift you want to make, you can likely use the full credit this year. If it is smaller, plan for the carryforward.

• $1,700Max credit for individual filers
• $3,400Max for married filing jointly
• 5 yearsUnused credit carries forward

5. Is your gift timed correctly?

Only gifts made on or after January 1, 2027 qualify for the federal Education Freedom Tax Credit. This date is set in the law. Gifts made in 2026, even after the law passed, do not qualify.

If you want to give before the end of 2026 for tax planning purposes, that gift may still qualify for a charitable deduction but will not generate the Education Freedom Tax Credit. Starting January 1, 2027, qualifying cash gifts to approved SGOs can generate the credit.

Eligibility checklist

Before you give, run through this checklist:

• I will give to an SGO that serves students in a state that has opted in.
• My gift will be cash (check, electronic transfer, or credit card), not stock, property, or digital assets.
• My gift will go directly to a qualified SGO, not through a donor-advised fund.
• The SGO is approved by my state and expected to qualify under the federal program.
• My gift will be made on or after January 1, 2027.
• My federal income tax bill is large enough to absorb the credit, or I am prepared to carry forward the unused portion.

If you can check every item, you are likely in a good position to benefit from the credit. If you have any doubts, especially about the SGO qualification status or how the credit interacts with your state program, talk to a tax professional before you give.

Quick Answers

Do I need to live in a state that has opted in to give?

No. Eligible donors in every state can give and claim the federal credit, whether or not their home state has opted in, as long as they give to a federally approved SGO in a participating state.

Does a gift of stock count for the credit?

No. You must give cash to a qualified SGO. Gifts of stock, property, and digital assets do not qualify.

When can I start giving to claim the credit?

Only gifts made on or after January 1, 2027 qualify. Gifts made before that date do not generate the credit.

Ready to plan your gift?

Pledge your gift now and we will notify you the day giving opens on January 1, 2027. You can also use our calculator to estimate what the credit could be worth, or read the how to give and claim guide.

Pledge your gift

Also worth a look: the Alabama Accountability Act credit for donors in Alabama and the scholarship organizations you can give through.

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

Sources

Reviewed against IRS and Treasury sources on Nov 5, 2026.