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By Sam Stevenson
Associate News Editor
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New Internal Revenue Service (IRS) guidance has laid the groundwork for a significant education-related tax credit effective in 2027.
According to an IRS announcement, the Treasury will allow states to sign up early for a new program under a big federal tax law. This program gives people a federal tax credit when they donate money to organizations that provide scholarships.
By making this "advance election," states can get ready to offer this benefit sooner, so individuals who contribute to these scholarship programs can reduce their federal taxes.
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Why It Matters
The program, created under the One Big Beautiful Bill Act (OBBBA), aims to encourage private contributions to Scholarship Granting Organizations (SGOs) serving low- and middle-income K-12 students.
With up to $1,700 in nonrefundable federal tax credits available per taxpayer, the new measure stands to influence both individual and business tax planning, as well as state education policy.
Access to the credit relies on state decisions, which could generate disparities in availability across the country.
What To Know
On Friday, the Treasury Department and IRS issued Revenue Procedure 2026-6, which outlines how states—including the District of Columbia—can make an "advance election" to participate in a new federal tax credit for the 2027 calendar year.
The credit is available to individual taxpayers who make cash contributions to qualifying SGOs, as established by the OBBBA.
Starting January 1, 2027, eligible taxpayers may claim a nonrefundable tax credit of up to $1,700 per person for contributions to SGOs that provide scholarships for elementary and secondary education expenses.
A critical eligibility requirement is that the SGO must be located in a "covered state"—one that voluntarily elects to participate and submits a list of qualifying SGOs to the IRS.
Contributions to organizations in non-participating states, or out-of-state donations, will not qualify for the federal credit.
SGOs themselves must be tax-exempt under section 501(c)(3), cannot be private foundations, and must direct funds toward K-12 educational expenses, such as tuition or tutoring, for students from families earning below 300 percent of the area's median income, per KPMG.
The advance election process allows states to commit participation for 2027 before submitting their formal list of eligible SGOs, offering more preparation time for both states and the organizations that will distribute scholarships.
Form 15714, 'Advance Election to Participate Under Section 25F for 2027,' is now available on IRS.gov and can be submitted between January 1, 2026, and a final date to be determined in future IRS guidance.
What People Are Saying
The IRS announcement said: "A covered state is defined as one of the States, or the District of Columbia, that, for a calendar year, voluntarily elects to participate in the credit and identifies SGOs in the State."
North Carolina Governor Josh Stein said: "I see opportunities for the federal scholarship donation tax credit program to benefit North Carolina’s public school kids. Once the federal government issues sound guidance, I intend to opt North Carolina in so we can invest in the public school students most in need of after-school programs, tutoring, and other resources."
What Happens Next
Additional rules, procedures, and clarification, including the final submission deadlines and election process for subsequent years, will be provided in forthcoming IRS updates.
Notice 2025-70 has requested public comments on the certification and management of state SGO lists to ensure broad compliance and efficacy.
The IRS said: "Future guidance also will address how to make an election to participate in the new tax credit for calendar year 2027 at the same time the State submits the State SGO list, and how to make elections, including Advance Elections, to participate in the credit for subsequent calendar years."
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