A new federal tax credit arrives on January 1, 2027 and you might have heard many different names associated with it. The ECCA, the EFTC, the FSTC, Section 25F, or simply “the federal school choice tax credit.” Five terms, all used to refer to one law. If you’ve been searching for tax credits for K-12 scholarships and finding a different acronym on every page, this guide is for you.
Below, we untangle where each term comes from, explain how the credit actually works, and provide a glossary of every term you’re likely to see between now and tax season.
One new law, many names
The Educational Choice for Children Act (ECCA) is the name of the legislation that was introduced in Congress last session, after the first federal school choice tax credit was introduced in prior Congresses and spearheaded by then-Education Secretary Betsy DeVos. When Congress passed a major tax package, key provisions that were in the bill became law in July 2025. The law created a new section of the federal tax code, called Section 25F, establishing the first federal tax credit for donations that fund K-12 scholarships.
The credit itself is what is now known as the Education Freedom Tax Credit (EFTC). Others refer to this same tax credit as the federal scholarship tax credit (FSTC). And because the credit rewards donations that expand educational options, plenty of people simply search for the school choice tax credit.
Every one of those terms points to the same thing. The ECCA was where the idea was most recently introduced in Congress; the EFTC is the credit that was created in the tax package, known as the One Big Beautiful Bill Act or the Working Families Tax Cut; FSTC and “federal school choice tax credit” are descriptive names for that same credit; and Section 25F is where it lives in the tax code.
How the EFTC works
The mechanics matter, so here is the exact sequence:
- Step 1: You donate. You make a charitable contribution to a qualified Scholarship Granting Organization (SGO), a nonprofit that turns donations into K-12 scholarships for tuition, fees, tutoring, and other qualified expenses.
- Step 2: You earn a credit. That donation generates a dollar-for-dollar federal tax credit of up to $1,700. This is a credit, not a deduction. It reduces what you owe the IRS dollar for dollar.
- Step 3: You claim it when you file. You give first. The credit, up to $1,700, comes back when you file your federal return.
Donations begin in 2027, and the credit for those donations comes back on the return you file in 2028. Scholarships funded this way can reach families in every state that participates. Approximately 90% of American students meet the scholarship eligibility criteria.
ECCA vs. EFTC: the law vs. the credit
The most common point of confusion is whether the ECCA and the EFTC are two different programs. They aren’t. Think of the ECCA as an early blueprint and the EFTC as the building: the ECCA created the possibility, and the EFTC became a reality when key provisions were included in the tax package. It is the benefit taxpayers actually claim under those rules. If you search either term, you’re looking for the same answer.
You may also see references to the “ECCA tax credit” or the “ECCA bill.” Both are shorthand: the first means the EFTC, and the second refers to the legislation before parts of it became law.
What the EFTC is, and what it is not
School choice comes in several forms, and the vocabulary gets tangled fast. Here’s how the EFTC differs from the tools it’s most often confused with:
It is not a school voucher. Vouchers are government funds routed to parents through a state program, which parents can use to send their children to private schools. The EFTC involves no government money: private donors give to nonprofit SGOs, and SGOs award private scholarships. The government’s only role is granting the donor a tax credit.
It is not an education savings account (ESA). ESAs are state-run accounts parents spend on their own child’s education. The EFTC works from the donor side as it rewards the person funding scholarships, and an SGO awards them to families.
It is not a 529 plan or Coverdell account. Those are savings vehicles for your own family’s education expenses. The EFTC is a charitable-giving credit that funds other families’ scholarships.
It is not the “education tax credit” on your college bill like the The American Opportunity Tax Credit and Lifetime Learning Credit, which offset higher-education costs you paid for yourself or a dependent. The EFTC is about K-12 scholarships.
One more distinction worth naming: searches for a “private school tax credit” or “homeschool tax credit” usually imagine a credit parents claim for their own tuition or expenses. The EFTC is different. It’s claimed by donors, and families benefit through scholarships rather than through their own tax return.
The complete glossary of school choice tax credit terms
The law and the credit
Educational Choice for Children Act (ECCA) — The federal legislation that led to the first national scholarship tax credit. Key provisions were enacted in July 2025 in the Working Families Tax Cut, take effect January 1, 2027, and are permanent. There is no sunset date.
Education Freedom Tax Credit (EFTC) — The common name for the credit the ECCA created: a dollar-for-dollar federal tax credit of up to $1,700 for donations to qualified Scholarship Granting Organizations. Donate first; claim the credit when you file.
Federal scholarship tax credit (FSTC) — A descriptive name for the EFTC sometimes used in policy research and news coverage. Same credit, different label.
ETCF — A scrambled acronym that appears often in searches for this topic. There is no separate program called the ETCF. If you’ve seen it, the term you’re looking for is the Education Freedom Tax Credit (EFTC).
Section 25F (IRC §25F) — The new section of the Internal Revenue Code that houses the credit. Tax professionals and IRS documents refer to the credit this way. Treasury is expected to issue detailed rules under this section before launch.
One Big Beautiful Bill Act (OBBBA) or Working Families Tax Cuts — The common names for the budget legislation enacted in July 2025 (H.R. 1). Several of ECCA’s scholarship tax credit provisions became law as part of it, which is why searches about the bill’s education provisions lead here.
Credit for contributions to scholarship granting organizations — The formal, statutory description of the EFTC and the phrase you’ll see on IRS materials. Sometimes shortened to “scholarship granting credit.”
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.
State opt-in (participating states) — Each state decides whether to participate in the credit and identifies the qualified SGOs its residents’ donations can support. The list of participating states will take shape ahead of the January 1, 2027 start.
Treasury regulations — The detailed federal rules covering documentation, timing, and edge cases that the Treasury Department and IRS will publish before the credit goes live.
Giving and claiming
Tax credit — A dollar-for-dollar reduction in the tax you owe. If you donate $1,700 and owe $2,000 in federal taxes, you now owe $300.
Tax deduction — A reduction in your taxable income, worth only a fraction of its face value in actual savings. The EFTC is a credit, which is why a $1,700 donation can come all the way back at filing.
Dollar-for-dollar — Shorthand for how a credit works: every eligible dollar you give reduces your federal tax bill by one dollar, up to the $1,700 cap.
Nonrefundable credit — A credit that can reduce your tax bill to zero but won’t generate a refund check beyond what you owe. The EFTC is nonrefundable and you need federal tax liability to use it.
Carryforward — The ability to apply unused credit to a future year’s taxes. Relevant if your credit exceeds what you owe this year. Final Treasury guidance will spell out the details for the EFTC.
Tax liability — The total federal income tax you owe for the year before payments and credits — the number the EFTC reduces.
Adjusted gross income (AGI) — Your total income minus certain adjustments and the baseline figure on your tax return. Income definitions like AGI drive eligibility for many education benefits, including scholarship eligibility under the EFTC.
Charitable deduction interaction — You can’t claim both the EFTC and a charitable deduction on the same dollars. The credit replaces, rather than stacks on, the deduction for that donation.
The organizations and the scholarships
Scholarship Granting Organization (SGO) — A nonprofit that connects private donations to K-12 scholarships. SGOs are private entities. They vet applications, award scholarships, and must direct at least 90% of contributions to scholarships. They are not schools and not government agencies.
Tax credit scholarship — A scholarship funded by donations that earn the donor a tax credit. States have run tax credit scholarship initiatives for decades; the EFTC brings the model to the federal level for the first time.
Qualified expenses — What EFTC-funded scholarships can pay for: tuition, fees, tutoring, and other approved education costs. These follow the child to the school or services that fit.
Scholarship eligibility — The income-based test for which families can receive scholarships. It’s distinct from donor eligibility for the credit itself. AFC’s eligibility guide and calculator show where your family stands.
Donor number — The confirmation an SGO provides after your donation. The record you’ll use to claim the credit on your federal return.
The broader school choice landscape
School choice — The umbrella term for policies that let families choose the best educational path for their child, public, private, charter, or home-based, with education funding that follows students.
School voucher — A state-run benefit that routes government funds toward tuition at a school a family selects. Distinct from the EFTC, which is built on private donations and awards private scholarships through SGOs.
Education savings account (ESA) — A state-administered account that lets parents direct public funds toward their own child’s education expenses, including tuition, curriculum, tutoring, therapies. Donor-side credits like the EFTC and parent-side accounts like ESAs are separate tools.
Education freedom account — The name some state ESA-style efforts use for their accounts. If you’ve seen the phrase, note it describes a state benefit for parents, not the federal Education Freedom Tax Credit, despite the similar name.
529 plan — A tax-advantaged savings account families use for their own education costs. Contributions aren’t federally creditable, unlike an EFTC donation.
Coverdell education savings account — An older, smaller cousin of the 529 for education savings. Like the 529, it’s a savings vehicle for your own family rather than a charitable-giving credit.
American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit — The federal “education tax credits” most people know. Both offset higher-education costs you paid. Neither involves K-12 scholarships or charitable giving; that’s the EFTC’s lane.
Private school tax credit — A phrase people search when looking for help with tuition. Under the EFTC, the credit goes to donors. Families benefit through scholarships awarded by SGOs, not through a tuition credit on their own return.
Homeschool tax credit — Another parent-side search term. Federal law doesn’t offer a general homeschool credit; whether EFTC-funded scholarships can support home-based education costs will depend on final program rules and each SGO’s policies.
The ECCA is the federal law that led to the first national tax credit for donations funding K-12 scholarships. The EFTC was enacted in July 2025 and will be effective January 1, 2027, it lets taxpayers claim a dollar-for-dollar federal tax credit of up to $1,700 for contributions to qualified Scholarship Granting Organizations.
Yes and no. The ECCA is the legislation as it was introduced in Congress in 2025; the Education Freedom Tax Credit (EFTC) is the credit that was created in the tax package. FSTC and “federal school choice tax credit” are other names for the same credit.
FSTC is another name for the credit created by the ECCA — the same credit commonly called the Education Freedom Tax Credit. It provides up to $1,700, dollar for dollar, for donations to Scholarship Granting Organizations.
No. Vouchers route government funds to parents to select private schools. The EFTC is built entirely on private charitable donations: donors give to nonprofit SGOs, SGOs award private scholarships to families, and the donor receives a federal tax credit at filing.
The credit takes effect January 1, 2027. Donations begin in 2027, and the credit — up to $1,700, dollar for dollar — comes back when donors file their federal return in 2028. Registering early means being ready to give on day one.
An SGO is a nonprofit that turns private donations into K-12 scholarships covering tuition, fees, tutoring, and other qualified expenses. SGOs must direct at least 90% of contributions to scholarships, and donors can support SGOs in any participating state.
