Federal Scholarship Tax Credit participation will expand in 2027, with the Internal Revenue Service listing 30 states that have elected to join the new program.
The IRS updated its official participating-state list on October 22, 2026, ahead of the program’s January 1, 2027, start date.
Eligible individuals may be able to claim a nonrefundable federal income tax credit of up to $1,700 for qualified cash contributions to approved Scholarship Granting Organizations, or SGOs.
Married taxpayers filing jointly may be able to claim a combined credit of up to $3,400, subject to the rules and limitations that apply to the Federal Scholarship Tax Credit.
Table of Contents
Which states are participating in the 2027 program?
The IRS says the following states have elected to participate under Section 25F for calendar year 2027:
- Alabama
- Alaska
- Arkansas
- Colorado
- Florida
- Georgia
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- North Dakota
- North Carolina
- Ohio
- Oklahoma
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- West Virginia
- Wyoming
The IRS list is specifically identified as the participating-state list for 2027 and was current as of October 22, 2026.
How the Federal Scholarship Tax Credit works
The Federal Scholarship Tax Credit is designed to provide a federal tax benefit for certain cash contributions made to Scholarship Granting Organizations.
Those organizations use qualifying contributions to provide scholarships for eligible elementary and secondary education expenses.
The program is voluntary for states and the District of Columbia.
A taxpayer generally cannot claim the credit merely because a donation was made to an education-related charity.
The contribution must be made to an approved SGO in a state that has elected to participate and submitted its qualifying organization list to the IRS.
The IRS describes the credit as nonrefundable.
That means the credit can reduce federal income tax owed, but it generally cannot produce a federal refund by itself if it exceeds the taxpayer’s remaining tax liability.
When taxpayers can claim the credit
The program begins for qualified contributions made on or after January 1, 2027.
Taxpayers who make qualifying contributions during 2027 would generally claim the credit when filing their federal income tax return for that tax year.
The IRS has identified Form 8525, Federal Scholarship Tax Credit, as the form taxpayers will use to report the required information when claiming the credit.
Taxpayers should retain contribution records and confirm that the recipient organization appears on the applicable state’s approved SGO list.
A donation made before January 1, 2027, does not become eligible simply because the taxpayer files a return after the program begins.
Why the state list matters
State participation is a condition of using this credit.
The IRS says a state or the District of Columbia must first elect to participate and provide a list of participating SGOs before taxpayers can claim the credit for contributions connected with that jurisdiction.
This creates two separate checks for taxpayers.
- The taxpayer must confirm that the state has elected to participate for the applicable year.
- The taxpayer must confirm that the receiving organization is an approved SGO for that state and year.
The state list released by the IRS does not mean that every nonprofit operating in those states automatically qualifies.
Organizations must meet federal and state requirements before they can be included as participating SGOs.
What taxpayers should verify before donating
Taxpayers considering a contribution should verify the organization’s status before sending money.
The IRS advises individuals to check whether the organization is an approved SGO and is located in a participating state.
Donors should also tell the organization that the payment is intended to be treated as a qualified Section 25F contribution.
Records should show the payment amount, date, recipient organization and other information needed to complete the federal tax return.
Because the credit is nonrefundable, taxpayers should also consider whether they have enough federal income tax liability to use the full credit.
The maximum amount is not automatically available to every taxpayer, and eligibility depends on the contribution and the applicable statutory requirements.
The difference between the individual and joint-filer limits
The IRS says an individual taxpayer may be eligible for a credit of up to $1,700.
For married taxpayers filing jointly, each spouse may be able to claim up to $1,700, producing a combined maximum of $3,400 on the joint return.
The $3,400 figure is therefore a joint-return limit, not a separate credit available to every household regardless of filing status.
Other tax rules may affect the amount that can be claimed, including the taxpayer’s federal tax liability and any applicable reduction tied to a state tax credit for the same contribution.
Thirty states now appear on the IRS list
The updated list represents a broader participation level than the IRS reported earlier in 2026.
In June, the agency announced that 27 states had elected to participate.
The October 22 update adds Kansas, Kentucky and North Carolina to the published 2027 list, bringing the total to 30 states.
The participating-state list can change if additional states complete the election process or if the IRS updates information submitted by states.
Taxpayers should rely on the current IRS list and the applicable state’s SGO information when planning a 2027 contribution.
What the IRS announcement does not mean
The announcement does not create an immediate 2026 tax credit for donations made under the new program.
It also does not guarantee that a taxpayer will receive a refund or qualify for the full $1,700 amount.
The announcement is a participation update for the 2027 program, not a change to existing higher-education credits such as the American Opportunity Tax Credit or the Lifetime Learning Credit.
Those education credits have separate eligibility rules and generally apply to qualifying higher-education expenses rather than the SGO contribution program.
What happens next
States participating in the program must identify the Scholarship Granting Organizations that meet the applicable requirements.
The IRS is expected to maintain program information for states, SGOs and individual taxpayers as the 2027 launch approaches.
Taxpayers should wait for confirmation that an organization is approved before treating a contribution as eligible for the Federal Scholarship Tax Credit.
Additional IRS instructions and filing guidance may provide more detail about documentation, reporting and the use of Form 8525.
For now, the key date is January 1, 2027, when qualified contributions may begin receiving consideration under Section 25F.
Frequently Asked Questions
What is the Federal Scholarship Tax Credit?
The Federal Scholarship Tax Credit is a nonrefundable federal income tax credit for certain qualified cash contributions to approved Scholarship Granting Organizations that provide eligible elementary and secondary education scholarships.
How much is the Federal Scholarship Tax Credit worth?
Eligible individual taxpayers may claim up to $1,700. Married taxpayers filing jointly may be able to claim a combined maximum of $3,400.
When does the Federal Scholarship Tax Credit begin?
The program begins January 1, 2027, for qualifying contributions made during the 2027 tax year.
Which states participate in the 2027 program?
The IRS lists 30 participating states: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
Is the Federal Scholarship Tax Credit refundable?
No. The IRS describes the credit as nonrefundable, meaning it can reduce federal income tax owed but generally cannot create a refund beyond the taxpayer’s tax liability.
What form will taxpayers use to claim the credit?
The IRS identifies Form 8525, Federal Scholarship Tax Credit, for reporting the required information when claiming the credit.
Fact-Checked: The 2027 participating-state list, effective date and credit amounts were checked against current IRS pages and IRS program announcements reviewed on October 23, 2026.
Disclaimer: Eligibility depends on the taxpayer’s circumstances, the contribution, the participating state and the approved SGO list. Taxpayers should review current IRS guidance or consult a qualified tax professional.
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