Twenty-seven states have elected to participate in the federal scholarship tax credit program, the Internal Revenue Service announced on June 8, 2026, marking broad early adoption of a tax benefit that allows individual taxpayers to redirect up to $1,700 of their federal income tax liability toward private education scholarships.
The Federal Scholarship Tax Credit (FSTC), enacted under the One, Big, Beautiful Bill, enables taxpayers to claim a dollar-for-dollar federal income tax credit for qualified contributions made to Scholarship Granting Organizations (SGOs) in participating states. According to the IRS, the participating states are 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.
State participation in the program is voluntary, and states must formally elect to participate and submit a list of qualified SGOs to the IRS before taxpayers can claim the credit. “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,” IRS Chief Executive Officer Frank J. Bisignano said in the announcement. “We are hopeful that additional states will decide to participate.”
The credit takes effect on January 1, 2027, and applies to contributions made to SGOs in participating states. SGOs are nonprofit 501(c)(3) organizations that receive donations and distribute educational scholarships to eligible students for qualified K-12 education expenses, including tuition, fees, tutoring, and educational technology. The credit is nonrefundable, meaning it reduces a taxpayer’s federal income tax liability but does not result in a refund if the credit exceeds taxes owed.
Under the program, any individual taxpayer who owes federal income tax can qualify for the credit, provided they contribute to an SGO operating in a state that has opted in. As participation expands, the tax credit for education donations continues to grow across the nation, with education advocacy groups and policymakers tracking state opt-in decisions throughout 2026.
Sources
- Internal Revenue Service — announced 27 states have elected to participate in the Federal Scholarship Tax Credit program, details on participating states and program mechanics
- Education Commission of the States — explained how the program works and state participation requirements
- U.S. Department of Education — provided definition and scope of Scholarship Granting Organizations and eligible expenses
- Bipartisan Policy Center — described the nonrefundable credit structure and 2027 tax year implementation
