Quick Summary
The IRS has issued proposed and temporary regulations implementing new IRC Section 25F, which beginning in 2027 provides a dollar-for-dollar nonrefundable federal income tax credit for contributions to qualified Scholarship Granting Organizations (SGOs). States must voluntarily elect to participate, and SGOs must meet requirements such as public charity status and separate accounts for qualified contributions.
The Internal Revenue Service has issued proposed and temporary regulations implementing the new IRC Section 25F. Beginning in 2027, the provision will provide a dollar-for-dollar nonrefundable federal income tax credit for contributions to qualified Scholarship Granting Organizations (SGOs). States must voluntarily elect to participate and identify qualifying SGOs. A list of states that have made an advance election to participate can be found here.
Requirements for Scholarship Granting Organizations
- Qualify as a public charity
- Maintain separate accounts for qualified contributions
- Use at least 90% of applicable scholarship funds for eligible scholarships
- Appear on the state’s annual approved list
The proposed regulations provide detailed rules intended to make the new credit accessible to families and administrable for taxpayers, states, and SGOs. The associated temporary regulations provide states and SGOs with guidelines to prepare for 2027, which include procedures for state elections and certification of SGOs, electronic registration, donor acknowledgements, and reporting of qualified contributions.
The regulatory package addresses increasing access for students, expanding educational choice, expanding opportunities for SGOs and families, ensuring taxpayers can access the maximum credit, and protecting the funds.
More information on the Education Freedom Tax Credit can be found at Treasury-ED EFTC FAQ.pdf
Schneider Downs Tax Advisors run one of the largest regional tax practices in the country, pairing deep technical knowledge with a personal focus on every client. From new federal credits and implementing regulations to R&D credits and state and local tax, we turn complex change into practical, implementable strategy. To learn more, visit our Tax Services page, contact us or email us directly.
