Key Takeaways
- Eligible taxpayers may claim an annual federal income tax credit of up to $1,700 for qualifying contributions, or up to $3,400 for married couples filing jointly.
- Taxpayers may contribute to an eligible Scholarship Granting Organization (SGO) regardless of their state of residence.
- Scholarships may support a broad range of qualified elementary and secondary education expenses (e.g., private-school tuition, academic tutoring, books, supplies, computers) connected with a student’s enrollment or attendance.
- SGOs must register through the IRS SGO portal, create unique donor numbers in a uniform format, and report qualified contribution information to the IRS.
- Donors will need a unique donor number from the SGO to substantiate their qualified contribution.
Background
Internal Revenue Code Section 25F is a new nonrefundable individual tax credit for cash gifts to a scholarship granting organization. Congress added §25F as part of the One Big Beautiful Bill Act, enacted July 4, 2025. Beginning in 2027, individuals who make qualified contributions to an SGO may be eligible for the credit.
Section 25F Proposed & Temporary Regulations
The proposed regulations (REG-117119-25) provide detailed interpretive rules for the §25F credit, including rules related to student eligibility, organization operating tests, state elections, and the interaction with state credits and the charitable deduction. Taxpayers, organizations, and states may generally rely on the proposed regulations through the taxable year in which Treasury and the IRS publish final regulations.
The temporary regulations (T.D. 10057) are in force now and provide states and SGOs with rules needed to prepare for 2027, including procedures for state elections and certification of SGOs, electronic registration, donor acknowledgements, and reporting of qualified contributions.
States and SGOs Must Act by January 1, 2027
- SGOs must complete an electronic registration process with the IRS before January 1, 2027 to enable a donor to make a qualified contribution by that date. SGOs will have to complete that process using the IRS SGO portal.
- For calendar year 2027, states must opt in by January 1, 2027, and submit eligible SGOs to the IRS before February 15, 2027.
How Forvis Mazars Can Help
If you would like help navigating the SGO registration process, have questions about new §25F, including whether it creates tax planning opportunities for you or your organization, please reach out to a professional at Forvis Mazars.
Forvis Mazars Private Client services may include investment advisory services provided by Forvis Mazars Wealth Advisors, LLC, an SEC-registered investment adviser, and/or accounting, tax, and related solutions provided by Forvis Mazars, LLP. The information contained herein should not be considered investment advice to you, nor an offer to buy or sell any securities or financial instruments. The services, or investment strategies mentioned herein, may not be available to, or suitable, for you. Consult a financial advisor or tax professional before implementing any investment, tax or other strategy mentioned herein. The information herein is believed to be accurate as of the time it is presented and it may become inaccurate or outdated with the passage of time. Past performance does not guarantee future performance. All investments may lose money.