The U.S. Treasury Department and Internal Revenue Service released proposed regulations for the Education Freedom Tax Credit, a program beginning in 2027 that allows taxpayers to claim federal tax credits for contributions to scholarship-granting organizations (SGOs). Individual taxpayers may claim credits of up to $1,700, while married couples filing jointly may claim up to $3,400.
Scholarships may cover a broad range of K-12 education expenses, including private-school tuition, academic tutoring, special-needs services, books, supplies, and computers. Taxpayers may contribute to an eligible SGO regardless of their state of residence, allowing them to support scholarship organizations across participating states.
The proposed regulations expand access to scholarships by generally disregarding non-cash items when applying household-income limits. Treasury and IRS estimate the rules would allow approximately 96 percent of children in participating states to be eligible for scholarships. States that opt into the program identify eligible SGOs but may not impose operating requirements more restrictive than federal standards.
Treasury and IRS estimate that by 2030, the program could support 600 to 700 scholarship-granting organizations, with more than 11 million taxpayers making nearly $26 billion in annual contributions and funding as many as 2.2 million scholarships. Thirty states have already opted into the program.
The proposed regulations establish reporting, audit, and verification requirements for SGOs to prevent fraud and abuse, including procedures for removing organizations that fail to meet requirements. Taxpayers, states, and SGOs may rely on the proposed regulations for qualified contributions beginning January 1, 2027. The Education Freedom Tax Credit was enacted in 2025.