Both are federal tax credits. Both involve children. But they work very differently — and understanding the distinction could change how you think about your federal tax bill starting in 2027.
When most people think about education funding, they picture tax dollars flowing directly to public schools. That model has dominated for decades — but it has left many students behind.
Today, education funding is evolving toward a student-centered approach. For many families, that shift is opening doors they never thought were possible. One of the most important drivers of this change is something called a Scholarship Granting Organization (SGO).
A scholarship granting organization (SGO) is a nonprofit organization that connects private donations to education scholarships for K–12 students.
What Is a Scholarship Granting Organization — and What Is It Not?
An SGO is:
- A nonprofit organization that stewards funds donated for K–12 scholarships
- A provider of scholarships to eligible K–12 students
- A trusted bridge between donors and families
An SGO is not:
- A school or school operator
- A government-run entity
- A for-profit organization
- A distributor of scholarships based on politics or favoritism
- An authority over how schools teach
How Scholarship Granting Organizations Work
At a high level, the process looks like this:
- A donor — individual or organization — contributes to an SGO
- The SGO manages and safeguards those funds
- Scholarships are awarded to eligible K–12 students
- Families use scholarships for approved educational expenses
Be the First to Know
Get notified when the Education Freedom Tax Credit launches so you don’t miss the opportunity to support K–12 students while benefiting from a federal tax credit.
Who Benefits from a Scholarship Granting Organization?
Scholarships distributed through SGOs can fundamentally change the trajectory of a student’s life.
- Families gain access to school options they otherwise could not afford
- Students can enroll in schools that meet their unique needs
- Educational services once out of reach become attainable
For many parents, SGO scholarships mean the difference between being assigned to a failing district school and actively choosing the best educational path for their child.
Why SGOs Matter Right Now
Families across the country are asking for more choice, more transparency, and more say in their children’s education. SGOs are meeting that moment.
- Expand access to educational opportunities
- Empower parents without expanding government bureaucracy
- Encourage private generosity for the public good
- Ensure education funding follows students — not systems
- Provide focused accountability and transparency
What is the AFC Scholarship Fund?
The AFC Scholarship Fund is a national scholarship granting organization dedicated to expanding school choice and opportunity for families.
- Expanding school choice where options are limited
- Partnering with trusted K–12 scholarship providers
- Stepping in where no school choice programs exist
- Building a national fund ready to deliver impact at scale
Our goal is simple: empower families, educate donors, and serve as a trusted source for the latest news and opportunities in school choice.
No. The Child Tax Credit is an automatic credit for parents of qualifying children under 17. The Education Freedom Tax Credit requires a charitable contribution to a qualified scholarship granting organization (SGO) and generates a dollar-for-dollar federal tax credit of up to $1,700 when you file. They are separate credits and can both be claimed on the same federal return.
The Education Freedom Tax Credit becomes effective January 1, 2027. Contributions made to qualified SGOs beginning on that date will be eligible for the federal tax credit when donors file their 2027 taxes.
The EFTC is a dollar-for-dollar federal tax credit of up to $1,700 per taxpayer. Your federal tax liability is reduced by the full amount of your qualifying contribution, up to the $1,700 limit.
Yes. The EFTC requires you to make a charitable contribution to a qualified scholarship granting organization first. The contribution generates the tax credit when you file your federal return. The donation comes first; the tax benefit follows.
A scholarship granting organization (SGO) is a nonprofit that receives contributions and distributes them as scholarships to eligible K–12 students. Under the EFTC, contributions to qualified SGOs generate a dollar-for-dollar federal tax credit for the donor.
Yes. The EFTC is a federal tax credit and applies to your federal tax return regardless of your state’s decision to participate. You can contribute to a qualified SGO operating in any participating state and claim the credit on your federal taxes.
