The Federal Scholarship Tax Credit (FSTC) is new, and understanding how it works can be confusing. We’re here to make it easier. Explore our clear explanations, short videos, and easy-to-share flyers to learn how qualifying contributions may receive a federal tax credit and how scholarships can support K–12 educational opportunities.

Whether you’re considering a future contribution, exploring scholarships for your family, or helping a client understand the program, these materials make the essentials easier to understand and share.

Important: These materials provide general educational information, not individual tax, legal, or financial advice. Consult a qualified tax professional before making decisions.

These materials are designed for: 

• Individual taxpayers and potential donors interested in the Federal Scholarship Tax Credit.
• Tax preparers helping clients understand the federal program.
• Anyone who wants to learn how the Federal Scholarship Tax Credit works and supports K–12 educational opportunities.

Starting January 1, 2027, eligible individual taxpayers may receive a nonrefundable federal income-tax credit for qualifying cash contributions to eligible Scholarship Granting Organizations (SGOs). SGOs provide scholarships for qualified K–12 education expenses.

The annual credit is up to $1,700 per individual taxpayer, or up to $3,400 for married couples filing jointly. The amount a taxpayer can use depends on qualifying contributions, available federal income-tax liability, and applicable rules.

The FSTC is a federal income-tax credit, not a tax deduction. A tax deduction generally reduces taxable income; a tax credit generally reduces the tax owed. Because the FSTC is nonrefundable, it cannot reduce federal income-tax liability below zero.

A contribution for which the federal credit is allowed cannot also be deducted as a federal charitable contribution for that same amount.

Eligible individual taxpayers can contribute even if they do not have a child receiving a scholarship. Only qualifying cash contributions to an eligible SGO may receive the FSTC; donations of stock or other noncash property do not qualify.

The SGO must meet federal requirements and be included on an applicable participating state’s list submitted to the IRS. Contributions cannot be earmarked for a particular student.

When the federal program is available through Scholarkids, eligible taxpayers will be able to make qualifying cash contributions directly to an eligible Scholarship Granting Organization. Scholarkids plans to offer credit/debit cards, Apple Pay, Google Pay, and PayPal. Taxpayers may choose one contribution or plan smaller contributions during the year. Federal giving through Scholarkids is not yet open; payment options will be confirmed at launch.

Make Giving Easier by Adjusting Your W-4

Form W-4 tells your employer how much federal income tax to withhold. Taxpayers who expect to qualify for the FSTC may consider adjusting their withholding and separately using the additional take-home pay to make smaller contributions. For example, $1,700 over a year is about $142 a month.

A W-4 adjustment is optional; it is not a donation, does not itself claim the FSTC, and does not change the amount of federal tax owed. Consult a qualified tax professional before changing your withholding. 

Explainer Video: How the W-4 Paycheck Swap Works

Flyer: Fund a Child’s Education for Less Than $5 a Day

Taxpayers must make qualifying contributions, keep the required acknowledgment and records, and follow the IRS instructions for claiming the credit on their federal income-tax return.

The IRS has not yet released final taxpayer forms and filing instructions specifically for claiming the 2027 FSTC. We will update this section when those instructions become available. Form W-4 is used to adjust withholding; it is not the form used to claim the credit.

Federal scholarships may help eligible K–12 students who meet applicable income and other program requirements. Depending on federal rules, scholarships may support qualified expenses such as tuition, tutoring, curriculum, books, testing, educational technology, and certain educational services.

Eligibility does not guarantee an award. Scholarship decisions depend on applicable requirements and available funding.

These materials can help CPAs, Enrolled Agents, and tax preparers explain the new federal credit, review contribution records, and prepare clients for the 2027 tax year. Use the latest IRS guidance when advising clients or preparing returns.

Before advising a client about the FSTC, consider:

• Taxpayer eligibility, filing status, and applicable annual credit limit.
• Amount and date of each qualifying cash contribution.
• Whether the receiving SGO appears on a participating state’s IRS-submitted list for the relevant year.
• Contribution acknowledgments and other required donor records.
• Available federal income-tax liability, other applicable credits, and any eligible carryforward.
• Any state tax credit allowed for the same contribution and federal charitable-deduction restrictions.
• Current IRS forms and filing instructions when released; any W-4 withholding adjustments are separate from claiming the credit.

Scholarkids is preparing for the federal program. Federal tax-credit contributions and scholarship applications through Scholarkids are not yet available. Register your interest to receive updates and learn about future opportunities.