Overview
- A scholarship granting organization (SGO) is the nonprofit that turns donors' gifts into scholarships for eligible K-12 students.
- A qualifying SGO is a 501(c)(3) public charity that is approved by its state and listed with the IRS. States are expected to submit their lists by February 15, 2027.
- Gifts must be cash, and you can give to an approved SGO in any participating state, no matter where you live.
- Before you give, ask whether the SGO is on the IRS list, how you will get your acknowledgement and donor number, and how much of each gift goes to scholarships.
Is an SGO the same as a regular charity? No. An SGO is a nonprofit whose job is to turn gifts into scholarships for eligible students, working inside rules set by federal law and its state. A gift to a regular charity will not earn this credit unless the organization is an approved SGO.
A scholarship granting organization, or SGO, is the nonprofit that sits between donors and students. You give money to the SGO. The SGO turns those gifts into scholarships. Under the new federal Education Freedom Tax Credit, giving to a qualifying SGO can earn you a dollar for dollar credit on your federal taxes.
What an SGO does
An SGO collects donations from individuals, decides who receives scholarships, and sends the money toward education costs. It also sends each donor a written acknowledgement of their gift, which donors need to claim the credit.
Who can be an SGO
To qualify, an organization has to be a 501(c)(3) public charity. Private foundations do not count. It also has to be located in the state that approves it, and it has to follow the rules for how scholarship money is tracked and awarded.
Each participating state sends the IRS its list of approved SGOs. The governor or an authorized delegate reviews and certifies every organization on that list. The IRS then publishes the lists, and states are expected to submit theirs by February 15, 2027.
- 501(c)(3)Public charity required
- Feb 15States expected to submit SGO lists in 2027
- 300%Household income limit, as a share of area median income
Who gets the scholarships
SGOs give scholarships to eligible K-12 students. In general, a student must live in a household earning no more than 300 percent of the area median income and be able to enroll in a public school. Scholarships can cover things like tuition, fees, tutoring, books, and supplies.
Each SGO runs its own application and award process. Being eligible does not guarantee a scholarship, so families should apply directly to the organizations in their state.
How much goes to students
The proposed rules require an SGO to spend at least 90 percent of its income on scholarships. That leaves a small portion for administration. Before you give, it is fair to ask any SGO what share of each gift reaches students.
What donors should check before giving
Taxpayers cannot claim the credit for a gift in a state until that state has opted in and submitted its approved SGO list to the IRS. So the first thing to confirm is that the organization appears on the IRS list. Then ask how you will receive your acknowledgement and donor number, and when.
Keep the acknowledgement. You will use it to file Form 8525 with your federal return.
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Pledge your giftCan I give to an SGO in another state?
Yes. You can give to an approved SGO in any participating state, no matter where you live. Your gift supports students in that organization's state.
How an SGO is different from a regular charity
Most charities decide for themselves how to use your gift. An SGO has a narrower job. Its purpose is to raise money and turn it into scholarships for eligible students, and it works inside rules set by federal law and by its state. A regular charity can still be a great place to give, but a gift to one will not earn this credit unless the organization is an approved SGO.
Do SGOs have to be brand new?
Not necessarily. Some existing nonprofits that already run scholarship programs may apply to be included, and others may be formed for this purpose. Each state decides how it handles this. Tennessee, for example, has asked interested groups to complete a preliminary interest form. In Florida, Step Up For Students has announced plans to administer a new fund. Neither organization is on an official list yet, so donors should wait for the final lists before giving.
How states choose their SGOs
Each state sets up its own process for reviewing organizations. Once a state has its approved group, the governor or an authorized delegate certifies each organization and sends the list to the IRS through its online portal. The list is annual, so an organization has to stay in good standing to remain on it. If a group is not on the list, a gift to it does not qualify for the credit.
What an SGO has to do with your gift
Your gift to an SGO must be cash. The organization has to keep scholarship funds accounted for, use separate accounts when the rules require it, and follow the eligibility rules for students. It also has to send you an acknowledgement. Under the proposed rules, at least 90 percent of its income goes toward scholarships, so only a small share is left for running the organization.
Questions to ask any SGO
Before you give, ask the organization three simple things. Are you on the IRS list for your state? How and when will I receive my acknowledgement and donor number? How much of each gift goes to scholarships? A good SGO will answer clearly. If it cannot, treat that as a warning sign and keep looking.
It is also fair to ask how students are chosen, which grades the scholarships cover, and what expenses they can be used for. Those details tell you what your gift will actually support.
How an SGO decides who gets a scholarship
Each SGO builds its own application. In general, the family has to show that the student can enroll in a public school and that household income is no more than 300 percent of the area median income. Beyond that, the organization may weigh other factors, such as the cost of a particular school or the level of need. Because money is limited, qualifying does not guarantee an award.
What an SGO is not
An SGO is not a government agency, and it is not a school. It also does not give tax advice. Donors usually cannot direct a gift to a specific child, and an SGO cannot promise you a result on your return. Questions about your own taxes belong with a tax professional.
How to find an SGO near you
Start with your state's education or treasury website, since many states post information for groups and donors. Once the lists are published, the IRS will have the official version for every participating state. You can also look up any organization on the IRS Tax Exempt Organization Search to confirm that it is a 501(c)(3) public charity. Check these sources before you give so you know your gift counts.
A note on the rules
The credit takes effect for gifts beginning January 1, 2027. The Treasury has released proposed and temporary regulations, and they may change before they are final. For advice on your own taxes, talk to a tax professional.
Quick Answers
What is a scholarship granting organization?
A nonprofit that collects donations, awards scholarships to eligible K-12 students, and sends each donor a written acknowledgement needed to claim the credit.
Can I give to an SGO in another state?
Yes. You can give to an approved SGO in any participating state, no matter where you live. Your gift supports students in that organization's state.
What should I ask an SGO before I give?
Ask whether it is on the IRS list for its state, how and when you will receive your acknowledgement and donor number, and how much of each gift goes to scholarships.
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 see the state-by-state guide.
Also worth a look: how a donation reaches a student, how to give and claim, the state-by-state guide, 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 .
| Source | Used for |
|---|---|
| IRS Federal Scholarship Tax Credit page | Participating states and state SGO lists |
| IRS news release IR-2026-117 | Credit amounts, dates and participating states |
| Treasury Education Freedom Tax Credit FAQ | Eligibility, proposed rules and donor requirements |
| Proposed regulations | SGO requirements and credit rules |
