Source page: https://fund-ed-freedom-draft.jonnyanchoredarrows.chatgpt.site/fstc.html This Markdown version is generated from the visible page. Source publication and editorial review dates are preserved below. A practical introduction # Understand the FSTC What the Federal Scholarship Tax Credit does, who is involved, and where to check the details. Fund Ed Freedom explanation · Last reviewed October 28, 2026 ## The basic idea The FSTC is a federal tax credit for qualifying cash contributions to scholarship granting organizations, known as SGOs. Those organizations fund eligible students’ qualifying elementary and secondary education expenses. The credit begins in 2027. States choose whether to participate and identify qualifying SGOs. This is not a direct federal scholarship application for families. **A tax credit and a scholarship are different.** Donors may qualify for a credit. Families apply for scholarships through participating organizations. Neither benefit is automatic. Source: [Internal Revenue Code §25F](https://uscode.house.gov/us/usc/119-124/t26/s25F/) ## Who does what ### Donors Make qualifying cash contributions and retain the required records. Check the organization’s status and applicable tax rules before claiming a credit. ### Families Seek a participating SGO’s application information. Eligibility, available funding, and the organization’s award process affect whether a scholarship is offered. ### Education providers Help families understand services, costs, and documentation. A provider’s involvement does not establish that every service qualifies. ### Scholarship organizations Verify student eligibility, award scholarships, and meet operational and reporting requirements. Participation requires more than charitable status alone. Sources: [§25F requirements](https://uscode.house.gov/us/usc/119-124/t26/s25F/) [Treasury and IRS temporary regulations](https://www.govinfo.gov/content/pkg/FR-2026-10-02/html/2026-20264.htm) ## What is established - The statute sets a maximum annual credit of $1,700 per taxpayer. The credit is nonrefundable, so a contribution does not guarantee an immediate refund. - Participating states must identify qualifying SGOs. Check official lists rather than relying on an organization’s promotional claims. - The statutory student test includes eligibility to enroll in a public elementary or secondary school and prior-year household income no higher than 300% of area median gross income. - Qualified expenses are defined by federal law. Specific tutoring, school, or other learning costs need to satisfy those rules. Sources: [§25F, including eligibility and credit limitations](https://uscode.house.gov/us/usc/119-124/t26/s25F/) [Treasury’s October 1 explanation of the nonrefundable credit](https://home.treasury.gov/news/press-releases/sb0641) The IRS’s current state page describes up to $3,400 for married taxpayers filing jointly. Check applicable guidance and your circumstances before making a tax decision. [IRS FSTC participation resource](https://www.irs.gov/government-entities/federal-state-local-governments/federal-scholarship-tax-credit-fstc-participating-states) ## What to keep checking ### Proposed rules are still proposed Treasury and the IRS issued a broader proposed regulatory package in October 2026. Treasury says taxpayers, states, and SGOs may rely on it for qualifying contributions beginning January 1, 2027. That reliance statement does not make the proposal a final rule. ### Temporary rules have their own effective date The companion temporary regulations were published October 2, 2026 and take effect December 1, 2026. They address state elections and SGO procedures, including reporting and recordkeeping. ### Local availability remains a practical question Keep checking which SGOs are approved, when applications open, what expenses an organization supports, and what documentation it requires. State participation alone cannot answer those questions. Homeschool, co-op, after-school, and other emerging programs should verify how the applicable expense and eligibility rules apply. This guide does not establish blanket eligibility for any school setting or program model. Sources: [Treasury announcement and links to proposed rules](https://home.treasury.gov/news/press-releases/sb0641) [Temporary regulations and effective date](https://www.govinfo.gov/content/pkg/FR-2026-10-02/html/2026-20264.htm) ## Go to the source [Read the law: Internal Revenue Code §25F](https://uscode.house.gov/us/usc/119-124/t26/s25F/) [Check the IRS participating-state list](https://www.irs.gov/government-entities/federal-state-local-governments/federal-scholarship-tax-credit-fstc-participating-states) [Read Treasury’s implementation announcement](https://home.treasury.gov/news/press-releases/sb0641) [Read the temporary regulations](https://www.govinfo.gov/content/pkg/FR-2026-10-02/html/2026-20264.htm) This is an introduction, not individualized tax or legal advice. For a specific decision, use current official guidance and qualified advice. ## Site context **Fund Ed Freedom** News, ideas, and practical context on education funding. [Editorial standards](https://fund-ed-freedom-draft.jonnyanchoredarrows.chatgpt.site/about.html) [r/FundEdFreedom](https://www.reddit.com/r/FundEdFreedom/) Content last reviewed October 28, 2026. [AI-readable overview](https://fund-ed-freedom-draft.jonnyanchoredarrows.chatgpt.site/index.md) [For AI agents](https://fund-ed-freedom-draft.jonnyanchoredarrows.chatgpt.site/llms.txt) General information. Scholarship eligibility and tax treatment depend on applicable requirements and individual circumstances.