The Education Freedom Tax Credit is a new federal program that allows taxpayers to make qualified cash contributions to an eligible 501(c)(3) nonprofit Scholarship Granting Organization (SGO) that provides scholarships to eligible students attending public schools or accredited nonpublic schools for qualifying education-related expenses. In return for the contribution, the credit lowers the amount of federal income tax owed by the amount of the taxpayer’s qualified contribution, subject to applicable federal limitations.
- The federal tax credit provides up to $1,700 per individual or up to $3,400 for married couples filing jointly.
- Qualified contributions made on or after Jan. 1, 2027 can qualify for the credit.
- Qualified contributions made in 2027 are claimed on the taxpayer’s 2027 federal income tax return, generally filed in 2028.
Scholarship Granting Organizations
Scholarship Granting Organizations (SGOs) are eligible 501(c)(3) nonprofit organizations that accept qualified contributions from taxpayers to fund scholarships to eligible students for qualifying education-related expenses. Families apply directly to an SGO for a scholarship in a participating state. Interested nonprofit organizations must complete Iowa’s state application to participate as a SGO in Iowa.
To qualify as an SGO, an organization must:
- Be recognized as a tax-exempt public charity under IRC Section 501(c)(3); private foundations are not eligible.
- Meet specific federal requirements for awarding scholarships, managing contributions and verifying student eligibility.
- Apply to be included on Iowa’s list of approved SGOs.
Apply to participate as a SGO in Iowa by Dec. 11, 2026
The Iowa Department of Revenue is responsible for compiling Iowa’s list of Scholarship Granting Organizations (SGO). To be considered for inclusion on Iowa’s 2027 SGO list, interested organizations must complete the Iowa Scholarship Granting Organization application on the Iowa Department of Revenue’s website by 11:59 p.m. on Friday, Dec. 11, 2026.
Once qualified, SGOs must meet ongoing federal financial, recordkeeping, donor acknowledgement and IRS reporting requirements. After the state has submitted its official list of eligible SGOs to the Internal Revenue Service (IRS). Iowa's finalized list of approved SGOs will be available on the Iowa Department of Revenue’s Federal Education Freedom Tax Credit webpage.
Federal Resources
The U.S. Department of the Treasury and IRS have issued temporary and proposed regulations governing the program. Additional federal guidance may be provided as implementation progresses.
IRS Federal Scholarship Tax Credit - Program Overview
Education Freedom Tax Credit Fact Sheet
U.S. Department of the Treasury Temporary Regulation
U.S. Department of the Treasury Proposed Rule