IRS sets rules for federal education scholarship tax credit

The IRS released proposed and temporary regulations on Oct. 2 for the Education Freedom Tax Credit, also known as Section 25F. The program would let taxpayers claim up to $1,700 in credits for donations to authorized scholarship-granting organizations, with states choosing annually whether to participate starting Jan. 1, 2027. The temporary rules take effect Dec. 1, and both sets of regulations have a 60-day comment period.

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The IRS released two regulatory packages on Oct. 2 for the Education Freedom Tax Credit, also called Section 25F. Proposed rules address student eligibility, credit calculations, scholarship-granting organization operations, and state requirements. Temporary rules put certain procedural state and SGO mandates into effect early, beginning Dec. 1, so the program can launch as scheduled in 2027.

Donors could receive credits for contributions up to $1,700