Treasury and the IRS Release Federal Scholarship Tax Credit Regulations

Updated October 23, 2026: re-checked the IRS participating-state list (still 30 states, as of October 22, 2026) and clarified that the $3,400 joint amount depends on each spouse making their own contributions.

Key points

• Amount: up to $1,700 per individual. On a joint return, each spouse may claim up to $1,700 for their own qualified contributions, for up to $3,400.[source]
• Giving across state lines: donors may give to a listed SGO in any participating state, regardless of where they live.[source]
• Relying on the IRS list: taxpayers generally may rely on an organization's inclusion on the IRS SGO list.[source]
• State credits: a taxpayer-favorable ordering rule applies a state credit first to undesignated gifts, preserving as much of the federal credit as the statute allows.[source]
• Carryforward: unused credit carries forward up to five years.[source]
• Student eligibility: the income test would generally disregard non-cash items, with streamlined verification for certain families. Treasury and the IRS estimate about 96 percent of children in participating states would be eligible.[source]
• School choice: participating states could not limit the type of school recipients attend or the qualified expenses scholarships fund.[source]
• Donor privacy and integrity: SGOs assign unique donor numbers instead of collecting Social Security numbers, send acknowledgments by January 31, report to the IRS by February 28, and face annual audits.[source][source]

What it means now

• Donors: federal credit gifts start January 1, 2027, to SGOs on a participating state's list. Each spouse gives in their own name to use both limits. Ohio taxpayers can use Ohio's separate credit now. See the donor guide.
• Schools: the rules are concrete enough to plan around. See the school guide and readiness checklist.
• Advisors: clients will ask during year-end planning. See the advisor reference.

Still to come

• Public comments on the proposed regulations were due December 1, 2026; final rules may differ.
• States with advance elections must submit 2027 SGO lists by February 15, 2027, and the IRS will publish an IRS SGO list.[source]
• The IRS has named Form 8525 for claiming the credit; watch for its instructions.[source]