Update, October 2, 2026: Two things this article got wrong, both fixed below. First, the proposed rules published October 2 say you can give to a qualifying scholarship group in any participating state regardless of where you live, so a resident of a state that sat out can still claim the credit. Second, the $1,700 cap is per taxpayer, not per return: a married couple filing jointly can claim up to $3,400 if each spouse gives. The original headline said “Yours Might Not Be One.” For donors, that no longer matters.
If you owe federal income tax, you can cut your 2027 bill by up to $1,700 by giving to a K-12 scholarship group. If you’re married and you each give, it’s $3,400. And it doesn’t matter which state you live in.
That last part is the news. The IRS proposed rules, out October 2, say taxpayers “may contribute to an eligible SGO regardless of their state of residence.” A Californian can give to a scholarship group on Texas’s list and claim the credit.
What actually happens
Starting January 1, 2027, you give cash to a Scholarship Granting Organization, or SGO, that’s on a participating state’s list. You claim a federal credit equal to what you gave, up to $1,700. A deduction shaves a bit off your taxable income. A credit takes the dollar off your tax bill.
The joint-return question was a real fight. Lots of commenters asked Treasury to treat each spouse as a separate taxpayer. It agreed. In the IRS example, two spouses each give $2,000, each gets a $1,700 credit, and the couple claims $3,400 on one joint return. The extra $600 may still count as a regular charitable deduction.
Here’s the catch. Each spouse has to make their own contribution. One check from one spouse for $3,400 gets you $1,700.
The credit is nonrefundable. It can wipe out your tax but won’t pay you back more than you owed. Anything you can’t use carries forward five years.
The reader math
A $1,700 deduction at a 22% bracket is worth $374. A $1,700 credit is worth $1,700. That’s about four and a half times better for the same gift.
For a couple, the gap doubles. $3,400 off the tax bill versus $748 from deducting the same money.
Got a state scholarship credit too? It comes off first. Give $2,000, claim a $400 state credit, and your federal credit is $1,600. Want the full $1,700? Give a little more, or designate only part of a larger gift as qualified, since the rules apply a state credit to the non-qualified part first.
Verdict: if you already give to schools or kids’ charities, this is the cheapest donation you’ll make all year. Smart, as long as you owe federal tax.
What to do
Wait for January 1, 2027. Gifts before then don’t count.
Check the IRS SGO list before you give. The rules let you rely on an SGO being on that list at the moment you donate. Get the written acknowledgment.
If you’re married, split the gift so each spouse makes their own contribution and gets their own acknowledgment.
If your state is one of the 20 that sat out, the credit still works for you as a donor. The kids in your state are the ones who lose: SGOs can only award scholarships to students in their own state. Call your governor’s office if that bothers you.
Detail
These are proposed rules. Comments are due December 1, 2026, with a public hearing set for December 15. Taxpayers can rely on them for contributions made on or after January 1, 2027. The 30 states are named in the FAQ on this page and on the IRS page, last updated September 16.
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