Which States Have Opted In to the Federal Scholarship Tax Credit? A November 2026 Update
A new federal tax credit for donations to scholarship granting organizations begins on January 1, 2027, but it will not look the same in every state. Each state has to choose whether to take part, and the list of participating states keeps changing. Here is where things stood in early November 2026, what opting in means, and the dates donors and tax professionals should keep in mind.
As of October 22, 2026, 30 states were participating in the federal scholarship tax credit, according to the list the IRS posts on its program page. New York's governor has announced that the state will opt in. A small number of states have declined to take part, and in at least two cases a governor vetoed a bill related to participation. The remaining states have not yet been confirmed on the IRS list.
States opt in by submitting a form to the IRS. The IRS then publishes the current list of participating states, which makes its page the most reliable place to check. Because the list can change, any number reported in the news should be treated as a snapshot with a date attached.
The program was created under Section 25F of the Internal Revenue Code as part of the One Big Beautiful Bill Act. The IRS calls it the Federal Scholarship Tax Credit, and Treasury calls it the Education Freedom Tax Credit.
When a state opts in, scholarship granting organizations, often called SGOs, in that state can receive donations that qualify donors for the credit. Students in that state can then become eligible for scholarships funded through those organizations. Each SGO sets its own rules about who receives scholarships and what they can be used for.
Beginning January 1, 2027, eligible taxpayers who donate to an SGO can claim a federal credit of up to $1,700, or up to $3,400 for married couples filing jointly. The credit is nonrefundable, which means it can reduce federal tax to zero but will not create a refund on its own. Unused credit can carry forward for up to five years. Donors pay when they give and claim the credit when they file, so the benefit depends on each person's own tax liability.
The credit limit is separate from how much a donor chooses to give.
There are two different questions tied to state participation, and they have different answers.
Donors can generally give to an SGO in any participating state, not just the state where they live.
Students can receive these scholarships only in states that opted in.
A donor's gift does not automatically stay in the donor's home state. Anyone who cares where the money goes should check where an SGO operates and how it awards scholarships.
Proposed regulations are not final. Details, including reporting requirements for states and SGOs, could change before the program begins.
For donors, the practical step is to check the IRS list before giving and to confirm that the SGO operates in a participating state. Tax Credits for Education keeps a state-by-state tracker with dated participation notes, along with plain-English guides on how to give and claim. Always confirm the latest status against the IRS page before you act.
This article is general information and not tax advice. Talk with a qualified tax professional about how the credit applies to your situation.