The Education Freedom Tax Credit Starts at $1,700. Your Impact Doesn’t Stop There

In my view, the Education Freedom Tax Credit is the biggest philanthropic change to the tax code in more than a century. Billions of dollars in private, voluntary contributions can come off the sidelines and into K-12 education starting January 1, 2027.

Ask most people what they know about the Education Freedom Tax Credit (EFTC) and you’ll hear one number: $1,700. It shows up in headlines, ads and donation pages across the industry, and it’s often the first thing people learn about this federal scholarship tax credit.

It’s an important number. Give $1,700 to a qualified Scholarship Granting Organization (SGO), like AFC Scholarship Fund, and you can receive a dollar-for-dollar federal tax credit for the full gift. For most taxpayers, that makes a scholarship donation an easy decision.

But here’s what much of the industry is missing.

When $1,700 sits at the center of every message, donors start to read it as a limit. It isn’t one. The $1,700 limit applies to the credit. It doesn’t apply to your generosity.

A gift of $5,000, $50,000 or $100,000 can help many more children attend a school that fits them. For the students who need it most, that’s the difference between hoping for a better option and actually having one.

Below, we cover what the new Treasury rules say, what different gift sizes can do and how to give at the level you choose.

What the New Treasury Rules Say

On October 1, 2026, the U.S. Treasury Department released proposed regulations and companion temporary regulations for the EFTC. The biggest news for donors was how the credit works for married couples.

Give to a qualified SGO and receive a dollar-for-dollar federal tax credit: up to $1,700 for individuals, or up to $3,400 for married couples filing jointly. You give first; the credit reduces your federal tax bill when you file.

The guidance also confirmed these rules:

• Married couples can claim up to $3,400. Each spouse can contribute up to $1,700, for a combined credit of up to $3,400 on a joint return.
• Cash gifts qualify. That includes check, bank transfer and card payments. You can still give stock or other property as a regular charitable gift, but it won’t earn the credit.
• The credit is nonrefundable. It reduces the federal tax you owe. If your credit is larger than your tax bill, you can carry the unused amount forward for up to five years.
• Your Social Security number stays private. SGOs give donors a written acknowledgment with a unique donor number, so you don’t share your Social Security number with the SGO.
• You can check an SGO before you give. Donors can rely on the IRS list of eligible SGOs.
• State and federal credits are coordinated. If you also claim a state scholarship tax credit, an ordering rule is meant to protect as much of your federal credit as possible.

The credit applies to gifts made on or after January 1, 2027, and you claim it on your 2027 federal return. Every household is different, so talk with your tax advisor about how these rules apply to you.

Why $1,700 Isn’t the Final Stop

New tax benefits usually get explained by their limit. It’s the easiest fact to remember and the easiest to market.

But for the EFTC, “up to $1,700” has started to sound like “give $1,700.”

That’s a missed opportunity. The credit will bring millions of people into K-12 scholarship giving for the first time, and many of them can give more once they see what their gift does. The EFTC is also a rare kind of charitable donation tax credit: the credit amount comes straight off your federal tax bill, while most charitable gifts only earn a deduction.

Here’s the part that gets lost. The credit has a limit for each taxpayer, but there’s no cap on what Americans can give in total. That’s what makes this law so powerful, and every dollar above the credit adds to what reaches kids.

Here’s how it works at different levels:

• Give $1,700 as an individual, and the credit covers your full gift.
• Give $3,400 as a married couple filing jointly, and the credit covers your full gift.
• Give more, say $5,000, $50,000 or $100,000, and you receive the same credit. The amount above it is treated like any other charitable contribution under the usual tax rules.

Your credit stays the same. The number of children you help goes up.

What Your Gift Can Do

Scholarship amounts vary by student, school and need. The examples below use an illustrative scholarship of $5,000 for one student for one school year. They also reflect a federal rule: SGOs must spend at least 90% of their income on scholarships for eligible students.

$1,700: Where It Starts

A $1,700 gift supports at least $1,530 in scholarships. That covers about a third of one student’s scholarship, or things like tutoring, books and testing fees for the year. For a married couple, a $3,400 gift supports at least $3,060 in scholarships, more than half of one full scholarship. The credit gives everybody the chance to be a philanthropist.

At this level, the credit covers your entire gift.

$5,000: One Student’s School Year

A $5,000 gift supports at least $4,500 in scholarships, close to a full scholarship for one student. That could be a child starting at a faith-based school, a school for students with learning differences or a school focused on skilled trades.

The credit covers the first $1,700, or $3,400 for married couples filing jointly. The rest is treated like any other charitable contribution.

$50,000: A Group of Students

A $50,000 gift supports at least $45,000 in scholarships, enough for about nine students at our illustrative amount. That’s nine families who get to choose where their kids learn next year.

Your credit is the same as it would be on a $1,700 gift.

$100,000: A Full Classroom

A $100,000 gift supports at least $90,000 in scholarships, enough for about 18 students for a full school year. Eighteen kids, one gift. A gift this size can help a school welcome a new group of scholarship students or support families across a community. This is where major donors can make the biggest difference.

Where Your Gift Goes

The rules include protections that matter more as gifts get larger:

• At least 90% goes to scholarships. Federal law sets that minimum for every qualified SGO.
• Tax-credit gifts are kept separate. Under the new regulations, SGOs must keep qualified contributions separate from other funds.
• SGOs are audited. They’re subject to annual reporting and audits.
• Only approved SGOs qualify. An SGO must appear on a participating state’s list, and the IRS publishes the list of eligible organizations.
• Awards are made by the SGO. You choose the fund or community you want to support. Federal law doesn’t allow a gift to be directed to a specific child, so the SGO awards scholarships based on eligibility rules.

To see each step, read what happens to your donation after you give to an SGO.

Choose the Students You Want to Support

Many donors give more once they know who they’re helping. We built AFC Scholarship Fund to serve as many kids in need as possible, as quickly as possible. When you donate to a scholarship fund through AFC Scholarship Fund, you choose the students you support. There are funds for Catholic, Christian and Jewish schools, students with disabilities, military-connected families and students pursuing skilled trades, plus a general fund for students in any state or school type.

Explore the funds to find one that matches your values, or use the impact calculator to see what your gift could do.

How to Make a Scholarship Donation at Any Level

1. Start with the students. Decide what you want your gift to do, then pick the amount.
2. Give in cash on or after January 1, 2027. Cash gifts made in 2027 earn the credit on your 2027 federal return.
3. Talk with your tax advisor. This matters most if you plan to give more than the credit amount, give appreciated assets or also claim a state credit.
4. Pick your fund. Choose a fund that fits your values, or let AFC Scholarship Fund direct your gift where the need is greatest.
5. Talk with us about a larger gift. If you’re a major donor considering $50,000 or more, our team can help you plan how your gift supports students across a fund or community.

The Bottom Line

The EFTC makes it easy to start with $1,700, and for many donors that will be their first scholarship gift. It shouldn’t be their last or their largest. Whether you give $1,700 or $100,000, your credit is the same, and every dollar above it helps more children. Policy windows like this don’t stay open forever. Start with the credit, then ask yourself how many more kids you can help.

See what your gift could do with the AFC Scholarship Fund impact calculator.