The U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations to implement the new Federal Scholarship Tax Credit under section 25F, commonly known as the Education Freedom Tax Credit, the first federal tax credit supporting private contributions for K-12 scholarships.
Under the proposed regulations, eligible taxpayers may claim an annual credit of up to $1,700 for qualifying contributions, or up to $3,400 for married couples filing jointly. Treasury and the IRS also issued companion temporary regulations to establish key procedures for states and Scholarship Granting Organizations to prepare for the launch of the tax credit on Jan. 1, 2027.
"Under President Trump, this Administration continues to transform America's education system to meet the needs of each student," said U.S. Secretary of the Treasury Scott Bessent. "The Education Freedom Tax Credit marks a new chapter in educational freedom and opportunity by establishing America's first nationwide school choice program and empowering states to give students and families more options. Thirty states have already opted in, and we encourage all 50 states to participate so every American student and family can benefit."
"Education freedom is the key to unlocking opportunity and success for our next generation of students," said U.S. Secretary of Education Linda McMahon. "The Education Freedom Tax Credit, the largest expansion of school choice in history, will supercharge those opportunities for millions of children."
"The IRS is committed to helping American families by implementing this important new law that gives them freedom of choice when deciding how to educate their children," said IRS Chief Executive Officer Frank J. Bisignano.
Beginning in 2027, individual taxpayers may claim a nonrefundable federal income tax credit of up to $1,700 for qualified cash contributions to eligible SGOs, and married taxpayers filing jointly may claim a combined credit of up to $3,400. Participating states may opt in and identify eligible SGOs, and taxpayers may contribute to an eligible SGO regardless of their state of residence.
Scholarships may support private-school tuition, academic tutoring, special-needs services, books, supplies, computers and other equipment, and other qualifying expenses. By 2030, Treasury and the IRS estimate the program could support 600 to 700 SGOs, with more than 11 million taxpayers making nearly $26 billion in qualified contributions annually and funding as many as 2.2 million scholarships each year.
The proposed regulations include rules on household-income limits, streamlined eligibility verification, a framework for multistate SGOs, a taxpayer-favorable ordering rule, and five-year carryforwards. Treasury and the IRS estimate approximately 96% of children in participating states would be eligible to receive section 25F scholarship funds, and that an operational safe harbor could enable approximately 450 additional organizations to participate.
Taxpayers, states, and SGOs may rely on the proposed regulations for qualified contributions beginning Jan. 1, 2027. Section 25F was enacted in 2025 and applies to taxable years ending after Dec. 31, 2026.