Giving to a Scholarship Granting Organization takes a few minutes. Getting the details right is what makes your gift count toward the Education Freedom Tax Credit (EFTC). Here’s exactly how it works.
To donate to a Scholarship Granting Organization (SGO), life AFC Scholarship Fund, pick the fund you want to support, make a cash gift and mark it as an EFTC contribution when you give, keep the acknowledgment with your donor number, and claim the credit when you file your federal return. Gifts made on or after January 1, 2027, count toward the credit.
An SGO is a nonprofit that collects donations and turns them into K-12 scholarships. If you’re new to the idea, our guide to what an SGO is covers the basics.
Here’s exactly how the EFTC works. 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.
Here’s exactly how giving to a SGO works.
Step 1: Choose a Qualified SGO
Not every scholarship fund qualifies. For your gift to count toward the EFTC, the SGO has to be qualified under federal rules and serve students in a state that has opted in.
What to look for:
- It’s on the IRS list. The IRS will publish a list of qualified SGOs, and donors can rely on it when they give.
- It serves a participating state. States opt in each year and submit their own lists of qualified SGOs. You can check where things stand on our EFTC state tracker.
- Your own state doesn’t have to be in. You can give to a qualified SGO serving any participating state, wherever you live.
AFC Scholarship Fund is a nonprofit SGO preparing to accept gifts when giving opens on January 1, 2027.
Step 2: Pick the Fund You Want to Support
This is the part most donors enjoy. You decide what kind of students your gift helps.
When giving opens at AFC Scholarship Fund, you’ll be able to give to a general fund for students in any participating state, or choose a fund for students at Catholic, Christian or Jewish schools, students with disabilities, military-connected families or students pursuing skilled trades. Browse the funds to find the one that fits.
However, there is one thing you can’t do: direct your gift to a specific child. Federal law doesn’t allow it. You choose the fund, and the SGO awards scholarships based on eligibility.
Step 3: Make a Cash Gift and Mark It as an EFTC Contribution
This step is important as two details decide whether your gift counts toward the credit.
First, give cash. That includes card, check, bank transfer and, where an employer offers it, after-tax payroll deduction. Gifts of stock or other property don’t earn the credit. Give directly as an individual, too. Under the proposed rules, gifts made through a partnership or S corporation don’t qualify.
Second, designate the gift when you make it. You have to mark your gift as an EFTC contribution at the time you give. That choice is permanent. You can’t go back later and convert an ordinary gift into a credit gift. Our donation form will ask you to make this choice clearly.
Married? Each spouse makes their own gift. Each of you can give up to $1,700, for a combined credit of up to $3,400 on a joint return.
How much should you give? That’s up to you. Here’s the simple math:
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.
- 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, and you receive the same credit. The amount above it is treated like any other charitable contribution, subject to the usual tax rules. It also helps more students.
You can give once or spread your gift across the year. Every qualifying gift you make between January 1 and December 31 counts toward that year’s credit.
Step 4: Keep Your Acknowledgment and Donor Number
After your gift, you’ll get a receipt right away. Then, by January 31 of the following year, your SGO sends a written acknowledgment for the year. It includes:
- The total you gave as EFTC contributions that year
- A unique donor number
That donor number is important. It’s how the IRS matches your credit to your gift, and it means your SGO never has to collect your Social Security number. The SGO reports your gifts to the IRS separately.
File the acknowledgment with your tax documents. For more on how the matching works, see how the IRS verifies your donor number.
Step 5: Claim the Credit When You File
When you file your federal return for the year you gave, you claim the credit and include your donor number. Under the proposed rules, a claim filed without the donor number is treated as if there was no qualified gift, so don’t skip it.
A few things to know:
- It’s a credit, not a deduction. It lowers your federal tax bill dollar for dollar, and you don’t have to itemize.
- It can bring your bill to zero, but not below. The credit is nonrefundable. If it’s larger than what you owe, you can carry the unused amount forward for up to five years.
- A state credit can change the math. If you also claim a state tax credit for the same gift, talk with your tax advisor about how the two work together.
So a gift made in 2027 is claimed on the 2027 return you file in early 2028. Our EFTC donor timeline lays out every date.
When Can I Start Giving?
Giving opens January 1, 2027. That’s the first day donations to AFC Scholarship Fund can be made, and every gift from that day on can count toward the EFTC.
What Happens to Your Gift After You Give
Once your gift reaches the SGO, it goes to work:
- At least 90% goes to scholarships. Federal rules require qualified SGOs to spend at least 90% of their income on scholarships. Our 90% rule explainer covers the details.
- Credit gifts are tracked separately. SGOs keep Education Freedom Tax Credit contributions in their own account.
- SGOs are accountable. They register with the IRS, report donors, file annual certifications and complete annual independent audits.
For the full journey, read what happens to your donation after you give to an SGO.
Choose a qualified SGO, pick a fund, make a cash gift and designate it as an Education Freedom Tax Credit contribution when you give. Keep the acknowledgment with your donor number, then claim the credit when you file your federal return.
"SGO tax credit" usually refers to a tax credit for giving to a scholarship granting organization. At the federal level, that's the Education Freedom Tax Credit: up to $1,700 for individuals, or up to $3,400 for married couples filing jointly, starting with gifts made on or after January 1, 2027.
Cash gifts, including card, check, bank transfer and after-tax payroll deduction where an employer offers it. Stock and other property don't qualify for the credit.
You'll get a receipt when you give. By January 31 of the following year, your SGO sends a written acknowledgment with your total credit gifts for the year and a unique donor number to use when you file.
No. You can choose a fund or a community, but federal law doesn't allow a gift to be directed to a specific student.
Yes. You can give to a qualified SGO serving any participating state, even if your own state hasn't opted in.
The part of your gift that earns the Education Freedom Tax Credit gets the credit, not a deduction. If you give more than the credit amount, the extra is treated like any other charitable contribution under the usual tax rules.
No. Giving opens January 1, 2027. Until then, you can tell us you plan to give, and we'll let you know when giving opens.
Gifts must be made by December 31 to count toward that year's credit. Gifts made on January 1 or later count toward the next year.
This article is for informational and educational purposes only and does not constitute tax, legal or financial advice. Please consult your tax advisor for your situation. The Education Freedom Tax Credit takes effect January 1, 2027.
