Starting January 1, 2027, giving to a qualified Scholarship Granting Organization earns you a dollar-for-dollar federal tax credit of up to $1,700 (Treasury rules pending), not a deduction. If you owe federal income tax and already give to charity, plan to route that giving to an SGO in 2027.
That distinction is worth roughly four times as much. A deduction only shrinks your taxable income, so a $1,700 (Treasury rules pending) gift to an ordinary charity saves a 24% bracket taxpayer about $408. A credit cuts the tax bill itself. Owe $2,000, claim the credit, and you owe $300.
The order is what people get wrong. You give first, to an SGO. Check, card, and bank transfer all count. Donated stock doesn’t. The SGO sends you a receipt and, separately, awards a scholarship to an eligible student. You claim the credit later, when you file. Nothing redirects taxes you already owe, and no money comes back at the moment you give.
It’s worth planning around if any of these describe you:
- You owe federal income tax. The credit is non-refundable, so your own bill is the ceiling on what you can claim. Anything left over carries forward five years.
- You already donate somewhere. Sending it to an SGO instead costs you nothing and returns all of it rather than a fraction.
- You take the standard deduction. Since 2026 that caps your charitable write-off at $1,000, or $2,000 filing jointly. The credit works whether you itemize or not, and it returns the whole gift rather than a slice of it.
- You file jointly. The $1,700 (Treasury rules pending) cap runs per household, so a couple claims one credit between them rather than two.
There’s nothing to act on in 2026. Treasury’s proposed regulations are due this fall, and each participating state has to submit its list of approved SGOs there by January 1, so the shortlist of places to give doesn’t exist yet. The AFC Scholarship Fund, built by the American Federation for Children to operate as a national SGO for this credit, is taking interest registrations in the meantime. Set the reminder for January 2027 and decide on your number then.
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