Education Freedom Tax Credit FAQ

A reminder in January 2027. You are not paying anything or committing to give today.

The Federal Scholarship Tax Credit (FSTC), also called the Education Freedom Tax Credit (EFTC), is a federal credit under section 25F for cash gifts to eligible scholarship-granting organizations that fund K-12 scholarships. It applies to taxable years ending after December 31, 2026, and gifts qualify beginning January 1, 2027.

Under the Federal Scholarship Tax Credit, IRS rules state that a $1,700 contribution (donation) can lower your federal income taxes by $1,700. And married couples filing jointly can contribute and receive up to $3,400 back as a credit. You make the contribution in 2027, and claim the credit when you file your taxes in 2028.

Up to $1,700 per individual, or up to $3,400 for married couples filing jointly, for qualified cash gifts in a year. Under the proposed rules, each spouse on a joint return has a $1,700 cap. The credit is nonrefundable, so it cannot exceed your federal tax, and unused credit carries forward up to five years.

You make the contribution with your own money first. The credit then lowers your federal income tax dollar for dollar, which offsets your contribution. The credit can bring your federal income tax bill down to zero, and any amount left over can carry forward for up to five years.

If you already pay federal income tax through your paycheck, the credit could make your refund bigger.

The credit cannot exceed your federal tax, but unused credit carries forward up to five years. Use the calculator to estimate how much you could use.

No. You do not need to itemize deductions to claim the credit. A gift claimed for the credit cannot also be deducted as a charitable contribution. Talk with a tax professional about how this applies to your return.

Yes. Married couples filing jointly can claim up to $3,400, which is $1,700 per spouse under the proposed rules. Your total credit still cannot exceed your joint federal tax.

You can live in any state and qualify for the federal credit.

Alabama also has a separate scholarship tax credit available now for eligible donors who pay Alabama income taxes, offering dollar-for-dollar state income tax credits up to $100,000 a year for individuals or couples filing jointly, and uncapped for businesses taxed as C corporations. Credits can’t exceed your AL income tax for the year.

Yes. You can give to an SGO in any participating state, regardless of where you live. Scholarships serve students who live in states where the SGO is listed, so your state's decision affects where scholarships can go, but it does not stop you from giving to an SGO in a participating state.

Your contribution goes through our partner non-profit scholarship granting organization (SGO), which awards scholarships to eligible families to pay for school and educational services. We will share the organization's name and how to contribute when we reach out in January.

Check the IRS list of qualifying SGOs before you give, and tell the organization your gift is meant to qualify. You can generally rely on the IRS list at the time of your gift. Keep the acknowledgement your SGO sends, which includes your unique donor number.

No. Donors cannot earmark a gift for a specific student. You can share a preference for a type of fund, but that is an expression of interest, and the SGO makes the final scholarship decisions under its own rules and the law.

Under the proposed rules, students must be eligible to enroll in a public elementary or secondary school, with household income no more than 300% of the area median gross income. Treasury estimates about 96% of children in participating states would be eligible. Final rules may differ.

Under the proposed rules, the gift must be cash, including checks, electronic transfers, and after-tax payroll deductions. Digital assets do not count. You must designate the gift as a qualified contribution when you give, and any goods or services you receive in return reduce the qualified amount.

Under the proposed rules, after-tax payroll deductions count as cash gifts. Ask your employer whether it offers payroll giving to an eligible SGO, and keep the acknowledgement your SGO sends.

Gifts qualify beginning January 1, 2027. Your SGO sends an acknowledgement with your unique donor number by January 31 of the following year. Gifts made in 2027 are claimed on your 2027 return, generally filed in 2028. These dates come from Treasury and IRS guidance and may change.

Your SGO sends a written acknowledgement with your unique donor number by January 31 of the year after your gift. You need that number to claim the credit, so keep it with your tax records.

No. Treasury and the IRS issued proposed regulations on October 1, 2026, with a public hearing scheduled for December 15, 2026. Rules may change before they are final. Taxpayers may rely on the proposed rules if they follow them fully.