Education Freedom Tax Credit

Starting January 1, 2027, there’s a brand new federal tax credit that many people haven’t heard of yet. It’s called the Education Freedom Tax Credit. You basically donate cash to a nonprofit that funds K-12 scholarships, and you get a credit (not a deduction) against your federal income tax.

The nonprofits are called Scholarship Granting Organizations (SGOs). They’re public charities that spend at least 90% of their money on scholarships, which can cover private school tuition, tutoring, special-needs services, books, and supplies.

The credit is up to $1,700 per person, or $3,400 on a joint return.

Individual states have to opt in, and 30 have so far. But you can give to an SGO in any participating state, even if your own state hasn’t opted in. Of course, many people want to donate to an SGO in their own state, so that’s just something good to know. Here’s a list of states that have opted in so far. States have until February 15, 2027 to opt in.

After they have opted in, they will be to identify SGOs in your state. The IRS then will have a list available that you can reference before making your donation.

After donating, tell the SGO when you give that the gift is meant for the credit, and keep the written acknowledgement with your donor number. The SGO has to send it by January 31 of the following year. You won’t have to give them your Social Security number.

A 2027 gift gets claimed on your 2027 return, which you’ll file in 2028.