A new federal tax credit has the community buzzing about the possibility of lower tuition bills. Beginning in 2027, taxpayers can receive a tax credit for qualifying contributions to approved Scholarship Granting Organizations (SGOs). These organizations use the contributions to fund K–12 scholarships that could cover part of a family’s tuition costs.
There has also been a lot of confusion about how the program works and who will benefit. Here are the top questions we’ve been getting from parents and taxpayers.
This draft reflects the law and Treasury’s proposed regulations available as of November 5, 2026. Some operating rules remain proposed and may change.
1. Can I claim the credit for tuition I pay to my child’s school?
No. Tuition payments made directly to a school do not qualify for this credit. The credit applies to qualifying cash contributions to an approved Scholarship Granting Organization, or SGO. The SGO uses those contributions to fund scholarships for eligible students.
2. What is an SGO?
An SGO is a tax-exempt public charity that awards education scholarships. To participate in the federal program, it must meet federal requirements and appear on a participating state’s SGO list submitted to the IRS. Being a school or offering financial aid does not, by itself, make an organization an approved SGO.
Before donating, check the IRS SGO list and confirm with the organization that your contribution will qualify for the federal credit.
3. How much is the tax credit, and when does it start?
The credit begins with qualifying cash contributions made on or after January 1, 2027. The annual limit is $1,700 per individual. Under the proposed regulations, spouses filing jointly can qualify for a combined $3,400 if each spouse makes qualifying contributions. The limit applies across all SGOs you support, not separately to each organization.
A qualifying $1,000 donation can reduce your federal income tax by $1,000 if you have enough tax liability to use the credit. A donation above the annual limit does not increase that year’s maximum credit. State tax credits for the same contribution can also affect the federal amount.
4. Does that mean my donation costs me nothing?
The credit can offset the full amount of a qualifying donation within the annual limit, but you pay the donation first. You then claim the credit on your federal income tax return. It is not an immediate reimbursement from the SGO.
The credit is nonrefundable. If your federal income tax is too low to use all of it, the unused credit can carry forward for up to five years. You may not recover the full donation if you cannot use the credit within that period.
5. What if I usually get a tax refund?
You may still qualify. A refund often means that your withholding or estimated payments exceeded your final tax bill. It does not necessarily mean that you had no federal income tax liability. Ask your tax preparer how much of the credit you could use after your other credits are taken into account.
6. Can I also take a charitable deduction for the same donation?
You cannot claim a federal charitable deduction for the contribution amount for which the federal scholarship credit is allowed. If your gift exceeds the amount eligible for the credit, ask your tax preparer whether the remaining amount qualifies for a deduction. If a state also offers a credit for the gift, the federal and state benefits must be coordinated.
7. If I donate, will my child receive a scholarship?
A donation does not guarantee a scholarship for your child or give your family a larger award. Donating and applying for a scholarship are separate processes. You may apply without donating, and you may donate even if your family will not apply.
Donors cannot earmark gifts for a particular student, including their own child. The SGO selects recipients under its scholarship policies and the applicable rules. Restrictions also apply to scholarships for people with certain financial or management ties to the SGO and their families.
8. Who can qualify for a scholarship?
The student must be eligible to enroll in a public elementary or secondary school. Household income for the calendar year before the scholarship application must be no more than 300% of the area’s median income, with the limit adjusted for household size. The proposed rules generally base state eligibility on where the student lives.
There is no single nationwide dollar cutoff. A family of six can have a different limit from a family of four in the same area. Limits also vary by location. Ask the SGO which income limit applies to your household and what documentation it requires.
Meeting the federal requirements makes a student eligible for consideration. An SGO may use additional selection criteria, such as financial need or particular educational needs. Eligibility alone does not guarantee an award.
9. Does my state have to participate? What if my child’s school is across the state line?
For a student to receive a scholarship under the proposed rules, the student’s state of residence generally must participate, and the SGO must be listed in that state. A student may attend a school across the state line, even if the school’s state has not opted in. Confirm your family’s situation with the SGO.
The rule for donors is different. You can donate to a qualifying SGO and potentially claim the federal credit even if your own state does not participate.
10. How do I apply, and what information will I need?
Contact an SGO serving families in your state and ask about its application process, deadlines and participating schools. Your child’s school may be able to help you identify an SGO or prepare an application. The SGO decides the award.
Expect to provide information about household income, family size, residence and the student’s education expenses. Depending on the SGO’s verification process, this may include tax returns, income records or documentation of participation in a qualifying needs-based program. Ask which documents are accepted before gathering them.
11. How much scholarship money can my family receive?
There is no automatic award amount. The SGO’s available funding, selection policies and the student’s eligible expenses affect the award. The $1,700 figure is the annual credit limit for an individual donor. It is not a cap on a student’s scholarship.
Ask when award decisions will be made and whether the amount is confirmed before using it in your tuition budget.
12. Does the scholarship cover only private-school tuition?
No. Scholarships may cover qualified K-12 education expenses beyond tuition, including certain books, supplies, tutoring, special-needs services and computer costs. Eligibility depends on the expense and the applicable rules. The program can also support eligible students attending public schools.
Each SGO may limit the expenses it funds. Check with the SGO before assuming that a particular purchase or service will be covered.
13. Will the money be paid to me or to the school?
Under the proposed regulations, tuition and similar charges billed by the school must be paid directly to the school. The payment is applied to the scholarship recipient’s expenses. Other eligible expenses may follow different payment procedures. Ask the SGO how payments work before paying a bill yourself and expecting reimbursement.
14. Will a scholarship reduce the financial aid my school already gives us?
It may. The school decides how outside scholarship funds interact with its own tuition assistance. An SGO award could replace some school-funded aid or reduce the amount your family pays. Your bill may therefore fall by less than the full scholarship amount.
Ask the school how it will apply an SGO scholarship to your existing aid package. Confirm the answer before agreeing to a tuition arrangement.
15. If my child receives a scholarship once, can we count on it every year?
Not fully. Federal law gives priority to students who received a scholarship the previous school year, followed by eligible students whose siblings received a scholarship from that SGO. The proposed rules provide flexibility for certain tutoring and special-needs awards. However, priority does not guarantee renewal or the same dollar amount.
Ask about annual applications, income verification and renewal decisions. An award for one school year should not be treated as a commitment for the rest of your child’s education.
16. What should we do before the program begins?
Check whether your state is participating and ask your school which SGOs expect to serve its families. Find out when scholarship applications open. Before donating, verify the organization’s approved status, ask for the required donor acknowledgment and review the available credit with your tax preparer. Keep donation records and scholarship award notices.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice.
