Proposed Regulations: Federal Scholarship Tax Credit

Notice of proposed rulemaking and public hearing, REG-117199-25, RIN 1545-BR97, 91 FR 62818, FR Doc. 2026-20277 | U.S. Treasury | Federal Register, October 2, 2026

Treasury and the IRS proposed regulations for the whole Section 25F program. They cover how the credit is computed (up to $1,700 per taxpayer, with spouses filing jointly treated as separate taxpayers), what a scholarship granting organization must do to qualify, including the 90 percent spending test and an 85 percent safe harbor, how household income is verified, annual audits, and how states elect and submit their SGO lists. Taxpayers, SGOs and States may rely on the proposed regulations for qualified contributions made on or after January 1, 2027. Written comments are due December 1, 2026, and a public hearing is scheduled for December 15, 2026. Temporary regulations published the same day (TD 10057) carry the state election, SGO list and SGO reporting rules.

Why this matters: For schools and donors, these are the first detailed federal rules for the credit: they set out how much a donor can claim, what an SGO must do to qualify, and how families show they are eligible. They are proposed and may change after public comment, but they may be relied on for 2027 contributions.