The Federal Scholarship Tax Credit (Internal Revenue Code section 25F, enacted in 2025, which Treasury calls the “Education Freedom Tax Credit”) starts on 1 January 2027. Taxpayers who give cash to an eligible scholarship granting organization (SGO) in a participating state can claim a non-refundable credit of up to $1,700, or $3,400 for married couples filing jointly. Scholarships fund K–12 costs such as private-school tuition, tutoring, special-needs services, books and computers.

Which states are in

The IRS participating-states page lists 30 states for 2027 as of 22 October 2026: 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. Donors can give to an SGO in any participating state, wherever they live, but families can only receive scholarships through SGOs in states that opt in.

What the proposed rules say

  • States may not impose SGO rules stricter than section 25F, including limits on the type of school or the types of expenses a scholarship can fund.
  • Streamlined income verification for families in needs-based programs and for foster children. Treasury estimates about 96% of children in participating states would be eligible.
  • Unused credits carry forward up to five years. Donors get unique donor numbers, so SGOs don’t collect Social Security numbers.
  • Treasury and IRS estimate that by 2030 the program could support 600–700 SGOs, with 11 million+ taxpayers giving nearly $26 billion a year and up to 2.2 million scholarships.

The proposed regulations (FR Doc. 2026-20277) and companion temporary regulations (2026-20264) were published on 2 October. Comments on the proposed rules are due by 1 December 2026.

Participating states would not be permitted to impose SGO operating requirements that are more restrictive than those established by section 25F. — Treasury, 1 October 2026
Citizen impact: Parents in the 30 states could see new privately funded scholarships for 2027–28 if SGOs are certified in time. Parents in states not on the list, including large ones such as California, New York, Pennsylvania and Illinois, cannot get scholarships through the program unless their state opts in. Any U.S. taxpayer can still donate and claim the credit.

What this piece refuses

The 2030 numbers are Treasury estimates, not results. We give no figures on enrolment or savings for individual families. The state list changes as states elect to join, so check the IRS page. We do not characterise any state’s decision to stay out.

Bottom line

Thirty states are in for 2027. Donors get up to $1,700 ($3,400 joint) in credit, states can’t restrict school type, and comments on the proposed rules close 1 December.