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 January 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. I am profoundly grateful to President Trump and our partners at Treasury for ensuring that every child has access to the education they need, not one limited by ZIP code, family income, or government-imposed barriers."
"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. "To further that goal, these rules provide states, scholarship-granting organizations, and taxpayers with the clarity they need to prepare for this new education tax credit."
Beginning in 2027, the credit will encourage private contributions to participating Scholarship Granting Organizations, which use those funds to provide scholarships to eligible elementary and secondary school students. 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 that 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 address increasing access for students, expanding educational choice, expanding opportunities for scholarship organizations and families, ensuring taxpayers can access the maximum credit allowed by law, and protecting taxpayers and scholarship funds. Treasury and the IRS estimate that approximately 96 percent of children in participating states would be eligible to receive section 25F scholarship funds under the proposed rules and safe harbors.
Section 25F was enacted in 2025 and applies to taxable years ending after December 31, 2026. Taxpayers, states, and SGOs may rely on the proposed regulations for qualified contributions beginning January 1, 2027.