When the Federal Scholarship Tax Credit (FSTC) takes effect in 2027, it will let donors claim a federal tax credit for gifts to scholarship granting organizations (SGOs). SGOs exist to move donor dollars into scholarships for eligible students; donors get a tax credit, and students gain access to a school, program, or qualified educational expense that fits them.
Under 26 U.S.C. § 25F, the statute governing the FSTC, not less than 90% of an SGO’s income must go to those scholarships. For individuals looking to start an SGO, that 90% requirement may sound simple.
Running an SGO, however, is more complicated.
Founders may not always anticipate the full range of expenses that come with running an organization and serving donors and students.
Operating an SGO involves more than awarding scholarships and employing an executive director. Transaction fees associated with scholarship payments, technology and IT services, accounting and bookkeeping, office space, supplies, and other administrative expenses can all add up.
Understanding these costs early is an important part of building an SGO that can serve students while maintaining compliance with the 90% requirement.
That’s where the SGO Simulator comes in.
This calculator allows individuals considering starting an SGO to explore how operational expenses may vary based on the number of donors and students an organization serves. Users can also compare different approaches to covering operational costs, such as independently covering 100% of those costs versus sharing expenses.
The goal of the SGO Simulator is simple: help prospective SGO leaders understand the financial considerations involved in operating an SGO so they can plan accordingly.
Good planning starts with understanding the numbers. The SGO Simulator is another tool in your toolkit to help make that planning easier and ultimately make educational freedom accessible to more students.
Try out the SGO Simulator here.
Have more questions about starting an SGO? The Simulator is one piece of the puzzle. For the operational and technology decisions that come next, check out A Practical Guide to Tech Platforms, Operating Models and Tradeoffs, which walks through operating models and platform tradeoffs before you pick a vendor. And if you’re wondering how your state fits into the picture, A Practical Starting Point for States Implementing the FSTC breaks down how states are building the process to certify SGOs under the federal program.
