Summary
The IRS has announced a new federal tax credit starting in 2027 that benefits individuals who donate to organizations providing scholarships for K-12 students. This tax credit is part of a larger federal tax law and requires states to opt-in for their residents to benefit. Each qualifying taxpayer can receive a nonrefundable tax credit of up to $1,700.
Key Facts
- The IRS detailed a new tax credit effective in 2027 for donations to Scholarship Granting Organizations (SGOs).
- The tax credit is part of the One Big Beautiful Bill Act (OBBBA).
- Individuals can receive up to $1,700 in nonrefundable federal tax credits per taxpayer.
- States must voluntarily opt-in for residents to benefit from the credit.
- The tax credit is available to donors contributing to SGOs focused on K-12 education.
- To qualify, SGOs must be in participating states and be tax-exempt under section 501(c)(3).
- SGOs help students from families earning below 300% of the area's median income.
- States can prepare early by making an "advance election" to participate before 2027.
