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The Internal Revenue Service (IRS) recently announced that 27 states have elected to participate in the new Federal Scholarship Tax Credit (FSTC) program created under the One Big Beautiful Bill Act (OBBBA).
Beginning January 1, 2027, individual taxpayers may be eligible to claim a federal income tax credit of up to $1,700 for cash contributions to qualified Scholarship Granting Organizations (SGOs). These organizations provide scholarships for elementary and secondary education expenses.
Taxpayers may claim the credit only for cash contributions made to SGOs located in states that have elected to participate and submitted a list of qualifying organizations to the IRS. States must submit an annual list of qualifying SGOs to the IRS for taxpayers to claim the credit for contributions made within that state.
The FSTC represents a new charitable planning opportunity that differs from traditional charitable deduction rules. Rather than providing a charitable deduction, the program offers a dollar-for-dollar federal tax credit for qualifying contributions, subject to the annual $1,700 limitation.
As of June 2026, more than half of the states have already opted into the program. Participating states as of June 8, 2026 include: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
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