Where does your state stand?

Donors can claim the credit only for gifts to SGOs on the list of a state that has elected to participate (26 U.S.C. 25F). The IRS keeps the current list of participating states on its IRS, Federal Scholarship Tax Credit page, and our state status map shows where each state stands.

If your state has not yet made its election, a gift to an SGO in a participating state can still earn the credit, but those scholarships serve students in that state (26 U.S.C. 25F). Your state's decision is worth watching.

What should a private school decide before 2027?

Three decisions, in this order, because the SGO you choose shapes what you tell your families.

Which SGO or SGOs to work with. Ask each one three questions: will it keep a separate account for FSTC gifts, what is its audit plan, and how will it verify family income? The law requires the separate account. Treasury's proposed rules would add an independent audit every year and set out several ways to check family income, such as pay stubs, tax returns or a recent award letter for a program like SNAP or SSI. These details could change after public comments (proposed rules).

Know your families. Get a rough sense of how many of your families fall at or below 300 percent of area median gross income, adjusted for household size, without promising anyone a scholarship (26 U.S.C. 25F).

Tell your community carefully. Gifts increase the scholarship funding available to students. They are never tied to a particular child.

What have the new rules answered, and what is still open?

Treasury and the IRS released two sets of rules on October 1, 2026, and the Federal Register published them on October 2 (temporary rules; proposed rules). The temporary rules apply from September 1, 2026. The proposed rules could still change after public comments, which are due December 1, 2026. Donors, SGOs and states may rely on the proposed rules for gifts made on or after January 1, 2027, in tax years that end before Treasury publishes the regulations in final form, as long as each one follows the parts that apply to it in full and consistently. Together the two answer three of the four questions below.

Answered:

• Whether existing scholarship organizations qualify as they are. Not automatically, and this is settled. Under the law and Treasury's temporary rules, an organization that runs a state tax credit scholarship program must meet the federal requirements on its own and be on a participating state's list before gifts to it earn the federal credit (temporary rules).
• How the $1,700 cap applies to a married couple filing jointly. Up to $1,700 per taxpayer. Under the proposed regulations, spouses filing jointly are treated as separate taxpayers, so a couple can claim up to $3,400 if each spouse gives at least $1,700. (proposed rules)
• How far the state-credit reduction reaches. Under the proposed rules, only a state credit for the same gifts counts, and it comes off before the $1,700 cap: a $2,000 gift with a $400 state credit leaves a $1,600 federal credit. A state tax deduction, unlike a state credit, generally does not reduce the federal credit (proposed rules).

Still open:

• Whether a donor may designate a particular school.

We set out these and four more questions before the rules came out, in Eight questions private schools need the Federal Scholarship Tax Credit rules to answer. Our plain-language review for private schools gives each answer and its status.

One more rule you may have seen: the September 3 proposed rule on tax-exempt status and discrimination is separate and is not part of the credit (IRS, IR-2026-103).