Thirty states have opted into the new federal scholarship tax credit for 2027, IRS list shows

Thirty states have elected to take part in the new federal tax credit for donations to K-12 scholarship charities when it begins on January 1, 2027, according to a list the IRS updated on October 22, 2026. That is three more than the 27 states the agency announced in June.

Comparing the two lists, Kansas, Kentucky and North Carolina appear on the October list but not in the IRS’s June 8 announcement. The District of Columbia, which can also take part, is not on the list.

How the credit works

The credit was created by the July 2025 tax law, Public Law 119-21, as section 25F of the tax code. It is a nonrefundable credit for cash contributions to scholarship granting organizations, or SGOs, which are 501(c)(3) charities that are not private foundations. The IRS says the credit is worth up to $1,700, or $3,400 on a joint return. It can reduce a donor’s tax bill but not produce a refund, and unused credit can generally be carried forward for up to five years.

Three rules limit the benefit. The credit is reduced by any state tax credit the donor receives for the same contributions. A contribution that earns the federal credit cannot also be counted as a charitable deduction. And the SGO must use the money for scholarships solely within the state that listed it.

The organizations face their own requirements under the statute. An SGO must spend at least 90% of its income on scholarships, give them to at least 10 students who do not all attend the same school, and award them only to students from households with income no greater than 300% of the area median gross income. It must keep qualified contributions in separate accounts and may not earmark gifts for a particular student.

What states and charities must do next

Temporary regulations published in the Federal Register on October 2, 2026, and effective December 1, 2026, set the schedule. For 2027, a state must submit its advance election on Form 15714 on or before January 1, 2027, and can perfect it by submitting its list of SGOs on or before February 15, 2027. A state that misses that step effectively prevents any organization in the state from qualifying as an SGO for 2027.

Elections last for one calendar year and must be renewed each year. Once a state has completed its election for a year, it cannot revoke it. The election is made by the governor or by whoever state law designates.

For charities that want to be listed, the regulations define “located in the State” broadly: an organization qualifies if it is authorized to do business in the state and complies with the state’s laws for charitable organizations. SGOs will also have new paperwork. They must send each donor a written acknowledgment by January 31 of the following year and report donor information to the IRS by February 28.

The Treasury Department and the IRS published a broader set of proposed regulations on the credit, REG-117199-25, in the same issue of the Federal Register. Public comments and requests to speak at the public hearing go through that proposal.