- Starting twenty twenty-seven, taxpayers can claim a seventeen hundred dollar credit for scholarship donations.
- Twenty-seven states have already filed official elections to participate in the federal program as of June twenty twenty-six.
- Eligibility is restricted to households with incomes below three hundred percent of the area median gross income.
The Federal Scholarship Tax Credit (FSTC), also called the Education Freedom Tax Credit, takes effect January 1, 2027. Individual taxpayers can claim a dollar-for-dollar federal credit of up to $1,700 for donations to authorized Scholarship Granting Organizations (SGOs). The credit first applies to tax year 2027 returns filed in 2028.
The One Big Beautiful Bill Act (OBBBA) created the program when President Trump signed it into law on July 4, 2025. The OBBBA, also called the Working Families Tax Cuts Act, pairs major tax reforms with immigration policy changes. DHS Secretary Kristi Noem called the signing “a win for law and order” and highlighted $165 billion in homeland security funding.
As of June 8, 2026, 27 states have formally elected to participate. IRS Chief Executive Officer Frank J. Bisignano confirmed the count in IRS News Release IR-2026-76. “It’s encouraging to see that 27 states have already signed up to participate in this program that promotes and supports elementary and secondary education,” Bisignano said. He noted that the IRS hopes additional states will join.
Treasury Secretary Scott Bessent reinforced the administration’s position on June 10, 2026. “Under President Trump’s leadership, we are taking a transformative step toward an education system that fits the student rather than the other way around,” Bessent said. He emphasized Treasury’s commitment to implementing the credit faithfully and effectively.
The FSTC channels donations through authorized SGOs, which use the funds to provide scholarships to eligible K-12 students. Covered expenses include private school tuition, tutoring, special education services, textbooks, and transportation. Taxpayers donate to an SGO and claim the credit on their federal return. The credit reduces tax liability directly, dollar for dollar, rather than reducing taxable income.
Student eligibility depends on household income. Recipients must reside in households with income at or below 300% of Area Median Gross Income (AGMI). State participation is voluntary. To enroll, a state must file an “Advance Election to Participate” using IRS Form 15714 and submit a list of qualified SGOs to the IRS.
| Feature | Before OBBBA | After OBBBA (Effective Jan 1, 2027) |
|---|---|---|
| Federal education donation credit | No federal credit existed | Up to $1,700, dollar-for-dollar |
| State participation | Not applicable | Voluntary; 27 states enrolled as of June 2026 |
| Scholarship eligibility | N/A | Household income at or below 300% of AGMI |
| State enrollment mechanism | None | IRS Form 15714 required |
| Credit availability | N/A | Tax year 2027 (returns filed in 2028) |
The following 27 states have filed elections as of June 8, 2026: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
States not currently listed may still join. Additional Form 15714 elections filed after June 8, 2026 will extend eligibility to residents in those states. Taxpayers should check the IRS forms and publications page for the latest participation list.
Taxpayers in the 27 participating states can reduce their federal tax liability by up to $1,700 starting in tax year 2027. Donations must go to authorized SGOs listed by the participating state. The credit applies to the donor’s federal income tax, not state tax.
Families with household income at or below 300% of AGMI can apply for scholarships through SGOs in their state. The scholarships cover private school tuition, tutoring, special education services, textbooks, and transportation for K-12 students.
Donors in non-participating states retain a pathway to the credit. A taxpayer in Illinois, for example, can donate to an SGO in Indiana and claim the federal credit. Students in Illinois would not receive scholarship funds from that donation.
💡 Tax Tip: Taxpayers in non-participating states can claim the credit by donating to SGOs in participating states. However, students in the donor’s home state will not qualify for scholarship funds.
The OBBBA also restructured USCIS fees. On April 29, 2026, USCIS issued an Interim Final Rule implementing the new fee schedule required by the legislation.
| Fee Category | Change Under OBBBA |
|---|---|
| Asylum application | New $100 fee |
| Annual asylum maintenance | New recurring fee |
| EAD validity periods | Revised (affects F-1 OPT holders) |
| Form I-94 | New fee requirement |
The revised EAD validity periods directly affect F-1 students on Optional Practical Training (OPT). Current OPT EADs are typically valid for 12 months, with STEM OPT extensions up to 24 additional months. The Interim Final Rule changes how USCIS calculates validity periods, which may alter renewal timelines for visa holders.
The new Form I-94 fee applies to nonimmigrants arriving at U.S. ports of entry. Travelers who previously received an electronic I-94 at no charge should budget for this cost. The fee also affects change-of-status applicants who receive I-94 records with USCIS approvals.
⚠️ Warning: F-1 OPT holders should verify their current EAD expiration date against the new validity rules. Filing renewal applications late risks gaps in work authorization and may affect lawful status.
Taxpayers planning to claim the FSTC should confirm whether their state has filed IRS Form 15714. Residents of participating states can begin donating to authorized SGOs on January 1, 2027. The credit appears on tax year 2027 returns filed in 2028.
F-1 OPT holders should review the April 29, 2026 Interim Final Rule and check their EAD expiration dates. File renewal applications early to account for new fee requirements and revised validity periods.
📅 Deadline Alert: The Federal Scholarship Tax Credit takes effect January 1, 2027. State elections to participate remain open. Taxpayers claim the credit on returns filed in 2028.
⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
