The U.S. Department of the Treasury and IRS today released proposed rules for the Education Freedom Tax Credit (EFTC), bringing families one step closer to new education opportunities beginning in January 2027. The program has the potential to unlock billions of dollars in scholarships, helping families access schools, tutoring and other educational services that meet their children’s needs.
Why it matters: The EFTC lets taxpayers anywhere in the country contribute to an eligible scholarship granting organization in a participating state and claim a nonrefundable federal tax credit of up to $1,700 per individual, or up to $3,400 for married couples filing jointly when each spouse makes qualifying contributions. Those contributions fund scholarships for K–12 students. Today’s rule gives states weighing participation a clearer picture of how they will identify eligible organizations and how the program will operate.
- The rules, RIN 1545-BR97 and 1545-BS17, were released in the Federal Register on October 1, 2026. They add clarity to the requirements Treasury previewed earlier this year for SGO recordkeeping, the 90% scholarship-spending test, annual audits, and state participation.
- The proposed rules and companion temporary regulations give governors and SGOs a framework to prepare for the credit’s January 1, 2027 launch.
What we’re saying:
Matt Frendewey, vice president of strategy:
“This program has the potential to unlock billions of dollars in new education funding, giving families access to opportunities that can change the trajectory of a child’s life. For leaders in the 20 states that have not opted in, the choice is straightforward: Will they give families in their state access to the same opportunities?
“We applaud the White House, U.S. Department of the Treasury, U.S. Department of Education and members of Congress for working hard and putting students and families first.”
Heidie Nesset, vice president of implementation:
“For states that have already opted in, these rules provide the roadmap to move from commitment to implementation. For those preparing to participate, now is the time to get started. This tax credit has the potential to serve millions of students across education settings. We’re ready to help state leaders and SGOs turn these rules into workable processes that make it easier for families to access scholarships.”
State of play: States that want to participate in 2027 must submit their advance election to the IRS by January 1, 2027, and their initial SGO list by February 15, 2027. Treasury reports that thirty states have already opted in. Participating states must also submit their eligible SGO lists, and taxpayers nationwide may contribute to qualifying SGOs in those states.
Go deeper: Resources for donors, SGOs, and state policymakers on the Education Freedom Tax Credit are available at EFTC Resources — yes. every kid. foundation.
