The EFTC credit, explained

What the EFTC is

The Education Freedom Tax Credit (EFTC) is a federal income tax credit for cash donations to scholarship granting organizations, or SGOs, that fund scholarships for elementary and secondary school students. It was enacted on July 4, 2025 in section 70411 of Public Law 119-21 and lives in section 25F of the Internal Revenue Code.

You will see the same credit called several names:

• EFTC, the Education Freedom Tax Credit, the name Treasury uses in its announcements.
• ECCA, from the Educational Choice for Children Act, the bill the provision came from. People searching for the “ECCA credit” mean this credit.
• FSTC, the Federal Scholarship Tax Credit, the name on the IRS website and in the regulations.
• Section 25F, the citation in the tax code.

The credit applies to taxable years ending after December 31, 2026, so the first contributions that count are gifts made on or after January 1, 2027.

How much the credit is worth

A donor can claim a credit equal to their qualified contributions, up to $1,700 per taxpayer per year, or $3,400 for married couples filing jointly. Because it is a credit and not a deduction, a $1,700 gift reduces federal income tax by $1,700.

• Married couples. The proposed regulations apply the limit to each individual, so spouses filing jointly can claim up to $3,400 together.
• Nonrefundable, with a carryforward. The credit can bring tax owed to zero but not below. Unused credit carries forward for up to five years, oldest first.
• State credits reduce it. If the donor also gets a State tax credit for the same contribution, the federal credit is reduced by that amount.
• No double benefit. The part of a gift that produces the credit cannot also be deducted as a charitable contribution.

There is no national cap on total credits and no sunset date in the enacted law, and the $1,700 figure is not indexed for inflation.

How donors claim it

Any US citizen or resident can claim the credit. The gift has to be cash, and it has to go to an SGO that appears on a participating State’s SGO list for that year. The donor does not need to live in that State.

1. The donor gives to a listed SGO during the calendar year.
2. By January 31 of the following year, the SGO sends a written acknowledgement with a unique donor number. SGOs do not collect donors’ Social Security numbers for this.
3. The donor files Form 8525, Federal Scholarship Tax Credit, with their return and enters the donor number.
4. By February 28, the SGO reports to the IRS the contributions made under each donor number, which is how the IRS matches the claim.

Which students benefit

An eligible student is one who:

• lives in a household with income, for the prior calendar year, at or below 300% of the area median gross income, and
• is eligible to enroll in a public elementary or secondary school.

Scholarships can only pay for qualified elementary or secondary education expenses, the K-12 expenses described in section 530(b)(3)(A) for Coverdell accounts. That list includes tuition, fees, tutoring, books, supplies, and similar costs. Treasury has said more guidance on eligible expenses is coming. Under section 139K, the scholarship is not taxable income to the family.

Which organizations qualify

An SGO must be a 501(c)(3) public charity, not a private foundation, and it must be on a participating State’s list. It also has to run its program by the federal rules: keep qualified contributions in a separate account, fund 10 or more students who don’t all attend the same school, spend at least 90% of its income on scholarships, give priority to returning students and their siblings, verify household income, and never earmark gifts for a particular child or award scholarships to disqualified persons.

The details are in our guides on starting an SGO and on what SGO software has to handle.

Where it is available

The credit is federal, but each State decides every year whether to take part and which SGOs to list. Thirty States were on the IRS list of participating States as of September 14, 2026. See every State’s EFTC status.

Key dates