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The tax credit program |
Who Can Claim the Federal Scholarship Tax Credit?
The Federal Scholarship Tax Credit is available to individual taxpayers who are U.S. citizens or residents and who make qualifying cash contributions to an eligible Scholarship Granting Organization (SGO). The credit begins January 1, 2027.
An individual taxpayer may claim a federal tax credit of up to $1,700 per taxable year for qualifying contributions to an eligible SGO, subject to the requirements of federal law and applicable state participation. The credit is nonrefundable.
Important Points
- Individual taxpayers: The credit is available to individuals who are U.S. citizens or residents.
- Cash contributions: The contribution must be a qualifying cash contribution to an eligible SGO.
- Up to $1,700: The federal credit is limited to $1,700 per taxpayer per taxable year.
- Participating states: The contribution must be made to an eligible SGO in a state or the District of Columbia that participates in the federal program and has identified the SGO as eligible.
- Federal tax credit: The credit reduces the individual's federal income tax liability. It is not a deduction from taxable income.
- State tax credits: The federal credit may be reduced by the amount of any state tax credit allowed for the same qualifying contribution.
- No double benefit: A contribution for which the Federal Scholarship Tax Credit is claimed generally cannot also be claimed as a charitable contribution deduction for federal income tax purposes.
Who Does Not Claim the Credit?
The SGO does not claim the Federal Scholarship Tax Credit. The SGO receives and administers qualifying contributions and uses them to provide eligible scholarships.
Likewise, an education foundation participating through the NSFA SGO does not claim the federal credit on its own tax return. The individual donor is the taxpayer who may claim the credit, provided all applicable requirements are satisfied.
Example
An individual contributes $1,700 in cash to an eligible NSFA SGO in a participating state. Assuming the contribution satisfies all federal requirements and the individual has sufficient federal tax liability, the individual may claim a $1,700 Federal Scholarship Tax Credit for that taxable year.
The credit is tied to the individual donor's contribution, not to the student's tax return or the participating education foundation.
Important: Eligibility and the amount of any credit depend on the federal requirements in effect for the applicable tax year, state participation, and the eligibility of the SGO. Donors should consult their tax advisor regarding their individual circumstances.
A New Opportunity for Education Foundations NationwideConnecting Education Foundations to the Federal Scholarship Tax CreditA new era of opportunity is beginning for education foundations across America. Beginning January 1, 2027, the Federal Scholarship Tax Credit (FSTC) will allow eligible individual taxpayers to receive a federal, nonrefundable tax credit of up to $1,700 for qualified contributions to approved Scholarship Granting Organizations (SGOs). Participating SGOs will use these contributions to provide scholarships for qualified elementary and secondary education expenses. Transforming the National School Foundation AssociationThe National School Foundation Association (NSFA) is transforming its existing 501(c)(3) organization into a national SGO platform designed specifically to help education foundations participate in this emerging opportunity. NSFA's mission is to strengthen education by supporting community-based organizations that provide scholarships, inspire charitable giving, and create transformative opportunities for learners of all ages. Through its SGO initiative, NSFA will provide a framework through which qualifying education foundations can participate in the Federal Scholarship Tax Credit while maintaining their connection to the communities and students they serve. A National Platform. A Local Impact.Education foundations understand their communities. They know the students, schools, families, educators, and educational needs that matter most. NSFA is building the infrastructure to help education foundations translate that community knowledge into expanded scholarship opportunities. The NSFA SGO model is intended to provide participating education foundations with access to:
Empowering Education Foundations to Do MoreThe Federal Scholarship Tax Credit creates a new pathway for individuals to direct charitable dollars toward scholarships and qualified educational expenses. Eligible scholarship expenses can extend beyond tuition and may include items such as tutoring, books and supplies, certain special-needs services, extended-day programs, and computer technology and internet access, subject to applicable federal requirements. For education foundations, this represents an opportunity to expand their role as community-based partners in educational opportunity. NSFA is building the bridge between the federal tax credit and the education foundations serving communities across the nation. |