Turn Your Tax Dollars into Opportunity for Students

Governors are awaiting Treasury guidance on how and when to submit the list of qualified SGOs in their state. Those lists will be made public when available, including on this website. In the meantime, several state-based SGOs have begun gearing up to raise funds and distribute K-12 scholarships in their states. You can learn more about those on the State Pages.

In addition, several organizations and SGOs have ambitions to provide K-12 scholarships in most states and Washington, DC. If you would like to begin researching them for yourself, here is an initial list:

• Afterschool Alliance
• ACE Scholarships
• Accord Kids
• AFC Scholarships
• Association of Christian School International
• Children’s Scholarship Fund
• Education Superhighway
• Endowment Project Foundation
• Family Tutoring Alliance
• Future School Fund
• National Alliance for Education Foundations
• National SGO
• Reficio
• TEACH Coalition

Yes, absolutely. You are still eligible for the tax credit, but you would need to contribute to an SGO that is qualified in another state. In that case, the scholarships would go to students in another state, not the state where you reside.

Yes, any federal taxpayer with a tax liability for the year can contribute up to $1,700 to an SGO and take the credit. Treasury is working on guidance on how current non-itemizers can take the credit.

Yes. Employees at companies with charitable giving programs can already direct donations to SGOs by deducting them from each paycheck. To make sure this has a net zero impact on each paycheck, such employees should amend their Form W-4 to reflect the credit.

The IRS is also reportedly working with payroll companies and large employers to develop withholding mechanisms to make it easier for all taxpayers to take advantage of the federal scholarship tax credit. The paycheck withholding for federal income tax (up to $1,700 annually) would instead be sent to the selected SGO. At year end, the payroll system could document the contribution, perhaps on the W-2.

Check back here for updates on the payroll withholding process.

Unfortunately, we will not know the answer to this question until Treasury issues its draft guidance and rules. Because the answer will have such a large impact on children, the FSTC Coalition has argued that the statutory language allows each individual in a marriage to receive the credit, so couples should be allowed to receive credits up to $3,400. However, others contend that the law should be read to mean the credit applies to tax filers, not individuals, creating a marriage penalty. We should have an answer before contributions are allowed in January 2027.

No. This is prohibited by law. You can, however, get a tax deduction for amounts you donate above the $1,700 per taxpayer.

Taxpayers are allowed to carry over any surplus contributions for up to five years. For example, if a taxpayer contributes $1,700 in 2027 but has a tax liability of $1,000 that year, $700 can be carried over and used in 2028 or through 2032. The annual credit is still capped at $1,700 or the tax liability, whichever is less, in 2028 and beyond.

Taxpayers are, of course, encouraged to contribute to nonprofit SGOs in amounts beyond the $1,700 cap of the tax credit. Most taxpayers would be expected to take a tax deduction for such donations.

Tax credits are an immediate reduction in your tax liability. So, a 100% tax credit of $1,000 means that the amount a taxpayer owes to the federal government would be reduced by $1,000. If you owe $1,200 to the IRS and you make a $1,000 contribution to a qualified SGO, you only owe the IRS $200.

Tax deductions, in contrast, lower a taxpayer’s adjusted gross income (AGI — the amount the IRS uses to calculate your tax). The amount of the tax incentive depends on your marginal tax rate. For example, if you have a marginal tax rate of 24%, a $1,000 tax-deductible contribution would lower your AGI by $1,000 and reduce your taxes by $240.

Please send your additional questions to questions@theFSTCcoalition.org. If they are of general interest, we will post them and the answers on this page.

Check out your state page for information about how to thank your governor for opting in — or encourage them to do so.