Education Freedom Tax Credit Scholarships

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Beginning January 1, 2027, the Education Freedom Tax Credit (officially the Federal Scholarship Tax Credit, IRC Section 25F) lets individual taxpayers fund Education Freedom Scholarships for K-12 students. In return, their federal income tax goes down by the same amount. AAA Scholarship Foundation (“AAA”) has administered K-12 tax credit scholarship programs for more than 20 years. We intend to participate as a Scholarship Granting Organization (SGO) in multiple states including Florida, Georgia and Nevada.

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How the Education Freedom Tax Credit works

• Up to $1,700 per taxpayer. Married couples filing jointly can receive up to $3,400.
• Dollar for dollar. The credit lowers the federal income tax you owe by the amount of your qualified gift, up to the limit. By contrast, a charitable deduction only lowers your taxable income.
• Limited to the tax you owe. The credit is nonrefundable. However, you can carry any unused amount forward for up to five years.
• Cash gifts on or after January 1, 2027. Gifts in 2026 do not qualify. Also, stock, property and other non-cash gifts do not qualify.
• Designate your gift. When you give, you will tell AAA that you intend your gift as a qualified contribution. You cannot change this designation later.
• Give from any state. You can claim the credit no matter where you live. Your gift then funds scholarships in the participating state you choose.

How to claim the Education Freedom Tax Credit

1. First, make a cash gift to AAA on or after January 1, 2027, and designate it for the credit.
2. Next, AAA will send you a written acknowledgment by January 31 of the following year. It includes your unique donor number, so you do not need to share your Social Security number.
3. Finally, claim the credit on your federal income tax return using the IRS form for this credit.

Where Education Freedom Scholarships will be available

Scholarships may only be granted to students who reside in states that have opted in. Currently 30 states have opted-in, including Florida, Georgia and Nevada. Arizona has not, so Arizona students cannot yet receive Education Freedom Scholarships. However, Arizona residents can still give and claim the federal credit by supporting students in Florida, Georgia or Nevada.

What Education Freedom Scholarships can cover

Families can use scholarships for qualified K-12 expenses. These include private school tuition and fees, academic tutoring, special-needs services, books and supplies. They also include computer equipment and internet access for education. In addition, uniforms, transportation and similar costs qualify when the school requires or provides them.

Which students are eligible

A student is eligible if they meet three tests. First, they live in a participating state. Second, they are eligible to enroll in a public elementary or secondary school. Third, their household income is at or below 300 percent of the area median gross income. Treasury estimates that about 96 percent of children in participating states meet this standard. Once applications open, families will apply with AAA.

Where things stand

The IRS issued temporary and proposed regulations on October 1, 2026. However, the IRS registration system for SGOs has not opened yet, and neither have the state SGO approval processes. AAA will apply for federal SGO status as soon as they open. We will also update this page as we complete each step. Keep in mind that the final rules may differ from the proposed rules.

Get Education Freedom Tax Credit updates

Sign up and we will let you know when AAA can accept contributions. We will also tell you when families can apply for Education Freedom Scholarships.

Education Freedom Tax Credit FAQs for donors

Can I give now and claim the credit?
Not yet. Only cash gifts on or after January 1, 2027 qualify. Sign up above, and we will let you know when AAA can accept qualified contributions.

Is this the same as a charitable deduction?
No. A deduction lowers your taxable income, so its value depends on your tax bracket. In contrast, this credit lowers your tax bill by the amount of your qualified gift, up to $1,700. You cannot also deduct the same portion of the gift.

What if I owe less than $1,700 in federal income tax?
The credit cannot reduce your tax below zero. However, you can carry any unused amount forward for up to five years.

Can my spouse and I each give $1,700?
Yes. The rules treat each spouse separately, so a married couple filing jointly can receive up to $3,400.

More questions from donors

I already give for an Arizona or Georgia state tax credit. Can I also claim the federal credit?
Possibly. Any state credit allowed on the same dollars reduces the federal credit. Under the proposed rules, though, you can give more than $1,700 and designate $1,700 for the federal credit. In that case, the state credit applies first to the rest of your gift. Your tax advisor can help you plan both gifts.

Can I give through my business?
No. Only individuals can claim the credit. Gifts through a partnership or S corporation do not qualify.

Do I need to live in Florida, Georgia or Nevada?
No. You can give from any state. Your gift will then support students in the participating state you choose.

Can I choose a specific student?
No. Federal rules do not allow donors to earmark gifts for a particular student.

Will I need to provide my Social Security number?
No. Instead, AAA will give you a unique donor number on your acknowledgment. You will use that number to claim the credit.

FAQs for families

How do you determine 300 percent of the area median income?
HUD publishes area median income each year. To find yours, scroll to the FY2026 IL Documentation button. Then select your state and county, and click View County Calculations. Finally, multiply the Median Family Income figure by 300 percent.

When can families apply?
Families can apply after AAA receives approval in each participating state. Please check back for updates.

Does AAA have scholarships families can apply for now?
Yes. Learn about the scholarships available now.

Learn more

Read the Treasury and IRS fact sheet >>>

Find out what to look for in a high quality SGO >>>

See how your school can benefit from the AAA School Fund >>>

Learn how to Adopt-A-School with your gift (coming soon)

Explore AAA’s Employer-Advised Fund >>>

The Federal Scholarship Tax Credit (IRC Section 25F) is a nonrefundable credit of up to $1,700 per taxpayer ($3,400 for married couples filing jointly). It applies to cash contributions made on or after January 1, 2027 to a Scholarship Granting Organization on a participating state’s list. The credit cannot exceed your federal income tax liability, but you may carry unused amounts forward up to five years. You may not deduct the portion of a gift that earns the credit as a charitable contribution. Also, any state tax credit allowed on that portion reduces the federal credit. This information reflects temporary and proposed regulations issued October 1, 2026, which may change. AAA Scholarship Foundation does not provide tax advice, so please consult your tax advisor.