The Federal Scholarship Tax Credit

One program, three names

The IRS calls it the Federal Scholarship Tax Credit (FSTC). Treasury and IRS news releases also call it the Education Freedom Tax Credit (EFTC). In the tax code it is Section 25F, "Qualified elementary and secondary education scholarships."[source] All three names refer to the same K-12 scholarship credit. It is unrelated to the federal college education credits.

What is law, and what is still proposed

Sources: the statute[source], the temporary regulations[source], the proposed regulations[source], and the IRS announcement stating that taxpayers, states, and SGOs may rely on the proposed regulations for qualified contributions beginning January 1, 2027.[source]

How much the credit is worth

• Up to $1,700 per individual per year. The statute caps the credit at $1,700.[source]
• Joint returns: up to $3,400, but only if each spouse gives. Under the proposed regulations, each spouse may claim up to $1,700 for qualified contributions they made, so a single $3,400 gift from one spouse supports only $1,700 of credit.[source]
• State credits come off first. The credit is reduced by any state credit allowed for your qualified contributions. The proposed regulations subtract the state credit from your qualified contributions before applying the $1,700 cap, which favors donors.[source][source]
• Nonrefundable, with a five-year carryforward. The credit can't reduce your tax below zero. Unused credit carries forward for up to five years, used first-in, first-out.[source]
• No double benefit. A contribution for which the credit is allowed is not treated as a charitable contribution for the federal charitable deduction.[source]

What counts as a qualified contribution

• Cash from an individual. The temporary regulations define cash as currency, check, money order, electronic transfer, after-tax payroll deduction, or a similar method in U.S. dollars. Digital assets do not count.[source]
• Designated when you give. You must tell the SGO, at the time of the contribution, that it is intended to be a qualified contribution. The designation can't be undone later.[source]
• Net of anything you receive. If the SGO gives you goods or services in return, their value is subtracted.[source]
• To an SGO on a participating state's list for that year. A gift to an organization that qualifies for a state credit but is not on a state's Section 25F list does not earn the federal credit.[source]
• Who can claim it. The credit is for individuals who are U.S. citizens or residents.[source] According to the IRS, donors may give to a listed SGO in any participating state, regardless of where they live.[source]

Participating states

A state takes part only if it elects to and submits its list of SGOs to the IRS. For 2027, a state must file an advance election (Form 15714) by January 1, 2027, and submit its SGO list by February 15, 2027.[source][source] As of October 22, 2026, the IRS listed 30 states with advance elections for 2027.[source]

States not in this table had not made an advance election as of that date, according to the IRS. This table does not show state tax credit programs, which are separate. Check the IRS participating-state page for the current list.

How to claim it

1. Confirm the SGO is listed. Check that the organization appears on the IRS SGO list for the year. Under the proposed regulations, donors generally may rely on that list.[source] The IRS had not published the list when this page was updated.
2. Give cash and designate it. Tell the SGO the payment is a qualified Section 25F contribution when you give.[source]
3. Watch for your acknowledgment. By January 31 of the following year, the SGO must send a written acknowledgment with its EIN, your total designated contributions for the year, your unique donor number, and whether you received any goods or services.[source]
4. File the IRS form. The IRS says to complete Form 8525, Federal Scholarship Tax Credit, listing the SGO and your donor number.[source] Check the IRS instructions for that form when they are released.

Which students scholarships can help

Scholarships may go only to eligible students: members of a household with income no greater than 300 percent of area median gross income for the prior year, who are eligible to enroll in a public elementary or secondary school.[source] Scholarships from a state-listed SGO go to students who reside in that state.[source] They can pay for expenses described in IRC 530(b)(3)(A), which covers costs at public, private, or religious schools, such as tuition, fees, tutoring, special-needs services, books, supplies, and computer technology.[source] Read more in the family guide.

SGOs must meet their own requirements, including serving at least 10 students who don't all attend the same school and spending at least 90 percent of income on scholarships. See the Section 25F SGO compliance checklist.

State credits, including Ohio

Some states, including Ohio, have their own scholarship tax credits. They are separate programs with separate rules, and they do not simply stack with the federal credit. Section 25F reduces the federal credit by any state credit allowed for your qualified contributions.[source] Under the proposed regulations, a state credit is treated as applying first to cash gifts you did not designate for the federal credit.[source] See how Ohio's credit and the federal credit interact.

Where ASN stands

American Scholarship Network is located in Ohio and certified by the Ohio Attorney General for Ohio's state credit. That state certification is not the same as being on Ohio's Section 25F list. ASN is approved for Ohio's Federal Scholarship Tax Credit (Section 25F) SGO list. The IRS will publish a national SGO list that donors can check. Donors in any state may give to ASN.

A federal SGO listed in Ohio funds scholarships for students who reside in Ohio.[source] Donors elsewhere may still give to an Ohio-listed SGO.[source]