The Federal Scholarship Tax Credit (FSTC), also called the Education Freedom Tax Credit (EFTC), is a federal tax credit designed to encourage donations that help students access educational opportunities beyond their assigned public school.
It allows eligible taxpayers to support Scholarship Granting Organizations (SGOs) that help families pay for qualifying educational expenses. These scholarships can help students access learning environments and resources that fit their needs.
How Does the FSTC Program Work?
A taxpayer donates to an approved Scholarship Granting Organization (SGO).
The individual donor receives a federal tax credit of up to $1,700 for qualifying contributions, subject to federal requirements.
The SGO awards scholarships to eligible K–12 students for qualifying educational expenses.
The program is scheduled to begin January 1, 2027, and states must opt in for scholarship contributions to qualify.
For more information, visit the IRS Federal Scholarship Tax Credit overview.
How Does the FSTC Differ From Other School Choice or Scholarship Programs?
The FSTC differs from traditional school choice programs because it is funded through private donations rather than direct government funding.
Through the FSTC, individuals can receive a federal tax credit for eligible donations made to approved SGOs. These organizations then award scholarships to eligible students to help cover qualified educational expenses.
Unlike many state-based school choice programs, the FSTC is a federal program designed to make scholarship opportunities available to eligible students across participating states.
Here are a few key differences:
Federally supported: The FSTC is established through federal law rather than an individual state's scholarship or voucher program.
Privately funded: Scholarship dollars come from individual donations to approved SGOs, not from a direct allocation of government funds to schools.
Donor-supported: Eligible taxpayers can receive a federal tax credit for qualifying contributions to participating SGOs.
Flexible educational opportunities: Scholarships can help cover qualified educational expenses for eligible K–12 students, not just private school tuition.
SGO-administered: Approved SGOs manage donations, determine scholarship awards, and oversee the distribution of funds.
The FSTC is designed to create additional opportunities for students and families while bringing together donors, schools, and scholarship organizations to support education.
For additional information, visit the IRS Federal Scholarship Tax Credit overview.