The federal school choice tax credit (Education Freedom Tax Credit)
Starting January 1, 2027, donors can take a federal tax credit of up to $1,700 for gifts to scholarship organizations in states that opt in. 30 states are on the IRS list as of September 14, 2026.
States that opted in (IRS list, September 14, 2026)
- Alabama
- Alaska
- Arkansas
- Colorado
- Florida
- Georgia
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- West Virginia
- Wyoming
Source: IRS, Federal Scholarship Tax Credit. The IRS counted 27 states on June 8, 2026. Kansas, Kentucky and North Carolina joined after legislatures overrode governors' vetoes. Virginia was enrolled by former Gov. Youngkin in January 2026.
Not on the list as of September 14, 2026: Arizona, Wisconsin, Maryland, Rhode Island, Maine, Vermont, District of Columbia, California, Pennsylvania, New York, Illinois, New Jersey, Michigan, Washington, Massachusetts, Minnesota, Oregon, Connecticut, New Mexico, Hawaii, Delaware. Families there can still use their state program; the federal credit simply will not fund scholarships in those states unless they join.
States that declined or have not joined
- Minnesota: Gov. Walz said Minnesota will not opt in. Source.
- Wisconsin: Gov. Evers declined (EdWeek, January 2026); still listed as declining in June 2026. Source.
- Oregon: Gov. Kotek declined. Source.
- Hawaii: First reported as declining in January 2026; in March the governor's office said it was reviewing the program again. No decision found, and Hawaii is not on the IRS list. Source.
- New Mexico: First reported as declining in January 2026; in March the state said it was seeking more federal guidance. No decision found, and New Mexico is not on the IRS list. Source.
- Arizona: Gov. Hobbs vetoed the legislature's opt-in bills (SB 1106 in January and SB 1142 in April 2026), saying she wants federal guidance first. Arizona is not on the IRS list. Source.
- Maryland: Gov. Moore said he wanted to see the federal regulations before deciding; proposed rules came out October 1, 2026 and no decision had been announced. Maryland is not on the IRS list. Source.
- New York: Gov. Hochul announced she intends to opt New York in. New York was not on the IRS list dated September 14, 2026. Source.
How it works
Individuals get a nonrefundable federal tax credit of up to $1,700 a year for cash donations to a scholarship granting organization (SGO) listed by a participating state. The credit is reduced by any state tax credit for the same donation, and unused credit carries forward up to five years. SGOs must spend at least 90% of income on scholarships for eligible students and give priority to prior recipients and their siblings.
- Donor credit
- Up to $1,700 per taxpayer per year. The IRS said on October 1, 2026 that married couples filing jointly can claim up to $3,400.
- Students who qualify
- Students in a household whose income for the prior calendar year is no more than 300% of area median gross income. SGOs may fund only qualified K-12 expenses as defined for Coverdell accounts, which include expenses at public, private and religious schools. SGOs must serve students who live in their state.
- Income limit
- 300% of area median gross income
- Start date
- Credit available for contributions made on or after January 1, 2027.
- How a state joins
- The governor, or another official or agency designated under state law, elects to participate and gives the Treasury a list of qualifying SGOs located in the state, with a certification. Lists are due by January 1 each year; for 2027, as early as practicable. The IRS lists states that made an advance election for 2027.
- The law
- Section 70411 of Public Law 119-21 (July 4, 2025), the One Big Beautiful Bill Act
Guidance so far
- IRS Notice 2025-70, request for comments on the section 25F credit, state certifications and SGO requirements (comments were due December 26, 2025). Source.
- IRS news release IR-2026-76, June 8, 2026: 27 states had elected to participate. Source.
- Treasury preview of forthcoming section 25F proposed regulations, remarks of June 9, 2026 (press release dated June 10): 90% spending safe harbor, meaning of located in the state, multistate SGOs, definition of school, income verification safe harbors, audits, donor numbers, a planned IRS SGO portal. Source.
- Treasury and the IRS issued proposed regulations on October 1, 2026 (REG-117199-25), scheduled for the Federal Register on October 2, with temporary regulations alongside. A public hearing is set for December 15, 2026. They restate that each participating state must give Treasury its list of scholarship organizations, for 2027 as early as practicable. Source.
Sources: IRS, Federal Scholarship Tax Credit (participating states as of September 14, 2026); IRS Notice 2025-70; Treasury, preview of forthcoming section 25F guidance, June 2026. The opt-in list changes as states join.
Common questions
Which states opted in to the federal school choice tax credit?
As of September 14, 2026, the IRS lists 30 states: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wyoming.
How much is the federal scholarship tax credit?
Up to $1,700 per taxpayer per year. The IRS said on October 1, 2026 that married couples filing jointly can claim up to $3,400.
Who can get a scholarship?
Students in a household whose income for the prior calendar year is no more than 300% of area median gross income. SGOs may fund only qualified K-12 expenses as defined for Coverdell accounts, which include expenses at public, private and religious schools. SGOs must serve students who live in their state.
When does it start?
Credit available for contributions made on or after January 1, 2027.
How does a state opt in?
The governor, or another official or agency designated under state law, elects to participate and gives the Treasury a list of qualifying SGOs located in the state, with a certification. Lists are due by January 1 each year; for 2027, as early as practicable. The IRS lists states that made an advance election for 2027.