What EFTC Scholarships Can Pay For

Public school districts can receive scholarship dollars for several categories of expenses families currently pay out-of-pocket: pay-to-play athletic and activity fees, AP and IB exam costs, dual enrollment course fees, CTE certification fees, technology for home use, and academic tutoring. Districts may also be paid for school-provided supplementary services like extended-day programs, summer school, and credit recovery, though Treasury's resolution of the supplant question may constrain what districts can bill for.

The two open questions most relevant to districts are (1) whether scholarships can pay for services already funded through public appropriations, and (2) whether off-site afterschool and summer programs qualify under Bucket 2. Until Treasury issues proposed regulations, districts should plan around the confirmed-eligible categories and treat pending categories as upside.

Districts considering EFTC participation should designate a single point person to track regulatory developments, identify which fees and programs would be eligible under current operations, and review billing infrastructure for receiving scholarship payments.

The Education Freedom Tax Credit creates a new pool of scholarship funding for K-12 families starting January 1, 2027. If your state has opted in and your household meets the income threshold, you can apply for scholarships through any Scholarship Granting Organization listed by your state.

Who qualifies. Families earning up to 300% of area median income are eligible, roughly 90% of U.S. households fall under this threshold. Eligibility is determined county by county based on HUD median income data, so the exact dollar threshold varies by where you live. Use the Eligibility Calculator to check your county's threshold against your household income.

What scholarships can be used for. The full categorized lists are in the sections above. The categories that matter most for families:

• Private school tuition and fees
• Public school out-of-pocket costs: pay-to-play athletic fees, AP and IB exam fees, dual enrollment, CTE certification fees
• Outside academic tutoring and learning centers
• Educational therapies for students with disabilities, including occupational, speech-language, and behavioral, beyond what an IEP covers
• Technology for home use: laptops, tablets, home internet access
• Books, calculators, musical instruments, art supplies, lab materials
• Before- and after-school care, summer school, and credit recovery programs run by your school

How the application works. Families apply for scholarships directly through a Scholarship Granting Organization. Each SGO sets its own application process and selection criteria within federal and state requirements. Your state's official SGO list will publish in late 2026 in advance of the January 2027 effective date. SGOs are required to verify income eligibility and to award scholarships using objective criteria; they cannot allow donors to direct specific scholarships to specific students.

Special needs families. EFTC includes "special needs services" as an explicitly eligible category. This opens up educational therapies, specialized instruction, and supplementary services that many families currently absorb out-of-pocket beyond what an IEP or 504 Plan provides. This is one of the most significant funding categories for families with students who have disabilities, and one of the categories least likely to be narrowed by Treasury's eventual guidance.

EFTC provides a dollar-for-dollar federal tax credit for contributions to listed Scholarship Granting Organizations in opted-in states. Unlike a tax deduction, which reduces taxable income, a credit reduces tax owed by the full amount of the credit.

Credit amounts.

• Individual filers: up to $1,700 per year
• Married filing jointly: up to $3,400 per year
• Five-year carryforward for credits exceeding federal tax liability in the contribution year
• Permanent, written into the federal tax code at IRC Section 25F with no sunset date

Who can claim the credit. Any individual taxpayer with sufficient federal income tax liability. The credit is non-refundable, meaning you can only claim up to the amount of federal tax you owe in a given year, but unused credit carries forward up to five years. The credit is available whether you itemize or take the standard deduction. Treasury guidance treats the credit and the charitable deduction as alternatives rather than additive: the same dollars generally should not generate both a federal credit and a federal deduction. Final regulations on the precise interaction are still pending.

How donations work.

1. Confirm your state has opted in. (State Status Map)
2. Choose a Scholarship Granting Organization from your state's official SGO list.
3. Make your contribution to the SGO.
4. Receive a contribution receipt from the SGO documenting the eligible amount.
5. Claim the credit on your federal income tax return for the year of the contribution.

Stacking with state tax credit programs. Many states have their own scholarship tax credit programs, including Pennsylvania's EITC, Indiana's School Scholarship Tax Credit, Georgia's GOAL/PEACH, and others. Whether and how a federal EFTC credit can be stacked with a state credit depends on your state's rules and on Treasury guidance, which is still pending. Some states are expected to limit double-credit treatment; others are likely to permit it. Consult a tax professional familiar with both programs before structuring a contribution intended to claim both credits.

Donor capacity planning. Whether you can use the full credit depends on your federal tax liability, not your income. The Eligibility Calculator includes a donor capacity estimate based on your tax situation. If your liability is below the credit cap, the five-year carryforward gives you flexibility to spread the credit across multiple tax years.