The Federal Scholarship Tax Credit, in plain English.
Beginning January 1, 2027, every U.S. taxpayer can redirect a portion of what they already owe in federal income tax to scholarships at participating Catholic schools.
What it is
The Federal Scholarship Tax Credit (FSTC) is a federal income tax credit established by §25F of the Internal Revenue Code. It allows individual taxpayers to make contributions to certified Scholarship Granting Organizations (SGOs) and receive a dollar-for-dollar credit against their federal tax liability — not a deduction, but a credit.
The credit takes effect for contributions made on or after January 1, 2027. Any unused credit may be carried forward up to five years.
How it works, in three steps
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Donor contributes
A U.S. taxpayer makes a contribution to a certified SGO — for example, the Catholic Education Opportunity Fund — up to the eligible credit limit for their filing status.
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Donor claims the credit
At tax time, the donor claims a dollar-for-dollar federal tax credit equal to the contribution amount, up to the cap. Unused credit may be carried forward up to five years.
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Scholarship is awarded
The SGO directs at least 90% of eligible contributions to scholarships for K–12 students from households at or below 300% of Area Median Income, at participating schools.
Eligibility
Who can donate
Any U.S. individual taxpayer with a federal income tax liability. The credit is available regardless of where the donor lives — donors in all 50 states may contribute. The maximum credit per tax year is $1,700 for individuals and $3,400 for joint filers, pending final IRS regulations.
Who can receive a scholarship
K–12 students whose household income is at or below 300% of Area Median Income for their location. Scholarships may be applied to tuition, fees, and other qualifying educational expenses at K–12 schools that are partnered with the SGO and located in states that have opted in to the federal program.
Which schools can participate
K–12 schools partnered with a certified SGO. CEOF partners with Catholic schools sponsored by religious orders — Lasallian, Jesuit, Franciscan, Dominican, Salesian, Sisters' communities, and others — as well as independent Catholic schools.
State opt-in status
The Federal Scholarship Tax Credit allows individual states to opt in to administer the program. As of April 2026, the following states have formally opted in:
Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wyoming.
Additional states are expected to opt in over time. Updated state opt-in status is published in our Policy Watch digest.
Common questions from donors.
Is this a tax deduction or a tax credit?
It is a tax credit. A credit reduces your federal tax bill dollar-for-dollar — it is more valuable than a deduction. If you owe $5,000 in federal income tax and contribute $1,700 to an eligible SGO, your federal tax bill becomes $3,300.
Can I contribute now?
The Federal Scholarship Tax Credit takes effect for contributions made on or after January 1, 2027. CEOF is preparing to accept contributions on that date. We are not soliciting gifts before then.
Do I have to live in a state that has opted in?
The federal credit is available to all U.S. taxpayers. State opt-in determines how the program is administered and where scholarships can flow. CEOF can accept contributions from donors nationally.
Can I direct my contribution to a specific school?
The federal program allows for donor preference within IRS guidelines. We’ll publish CEOF’s specific procedures once final Treasury and IRS regulations are issued.
Is my contribution also tax-deductible as a charitable donation?
You may not claim the same contribution as both a tax credit and a tax deduction. We strongly recommend consulting your tax advisor about how the credit applies to your specific situation.
How do I know my contribution is being used appropriately?
SGOs are required by federal law to direct at least 90% of eligible contributions to scholarships. CEOF publishes audited financials and Form 990 annually.
Important: The Catholic Education Opportunity Fund does not provide tax advice. The information on this page is general and educational. Please consult a qualified tax advisor for guidance specific to your situation. Final program rules are subject to forthcoming IRS regulations.
Get the Policy Watch digest.
A monthly summary of FSTC regulatory updates, state opt-in changes, and CEOF news — in plain English. Coming soon. Contact us to be notified when it begins.