The Tax Credit Is Where Your Giving Starts: What the 2026 Deduction Changes Mean for Gifts of Any Size

Most of what people have heard about the Education Freedom Tax Credit (EFTC) comes down to two numbers: $1,700 for individuals and $3,400 for married couples filing jointly. They are good numbers. Starting January 1, 2027, donors who give to a qualified Scholarship Granting Organization (SGO) can receive a dollar-for-dollar federal tax credit of up to those amounts. For millions of households, that makes a scholarship gift one of the easiest decisions in charitable giving.

Somewhere along the way, though, the credit amount started to sound like the amount to give, when it is really the amount the credit covers. Many donors will want to give $5,000, $10,000, $50,000, $100,000 or more, and every dollar above the credit still counts as a charitable contribution under the usual tax rules. More importantly, every one of those dollars can help another child get into a school that fits.

This guide explains how the credit works, how charitable contribution limits changed in 2026, and how the two fit together when you give more than the credit amount.

How the Education Freedom Tax Credit Works

Here’s how it 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. A gift made in 2027 is claimed on your 2027 return, which you file in early 2028.

A few details are worth knowing up front:

• Cash gifts qualify for the credit. That includes check, bank transfer and card payments. Donated stock and other property can still be given to an SGO as a regular charitable gift, but they do not earn the credit.
• The credit is nonrefundable. It reduces the tax you owe but will not create a refund beyond it. If your credit is larger than your tax bill, the unused amount can generally carry forward for up to five years.
• The same dollar cannot count twice. A dollar claimed for the credit cannot also be deducted as a charitable contribution.
• You can give from any state. The SGO must appear on a participating state’s list, but donors anywhere in the country can claim the federal credit.

How these rules apply can depend on your filing status and other details, so it’s always best to talk with your tax advisor about your own situation.

What Changed for Charitable Deductions in 2026

The same 2025 tax law that created the EFTC, the One Big Beautiful Bill Act, also changed how charitable deductions work, starting with the 2026 tax year. If you give regularly, these are the changes most likely to affect you.

A new deduction for people who don’t itemize. For the first time in several years, taxpayers who take the standard deduction can deduct cash gifts to qualifying public charities: up to $1,000 for single filers and $2,000 for married couples filing jointly. Gifts to donor-advised funds and some private foundations don’t count toward this deduction.

A new floor for people who do itemize. Itemizers can now deduct only the portion of their charitable giving that exceeds 0.5% of their adjusted gross income (AGI).

A cap on the value for the top bracket. Taxpayers in the 37% bracket will see the tax benefit of their charitable deduction limited to 35 cents per dollar.

The 60% limit is now permanent. Cash gifts to public charities remain deductible up to 60% of AGI, with any excess carried forward for up to five years.

Put simply, the deduction got a little less generous for many itemizers and a little more available for everyone else. That makes a dollar-for-dollar credit stand out even more.

Charitable Contribution Limits and the Credit: How They Work Together

Here’s the simple version:

• 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, $10,000 or $50,000, and you receive the same credit. The amount above it is treated like any other charitable contribution under the usual tax rules.

Your tax advisor can tell you how the amount above the credit applies to your situation, whether or not you itemize.

Why the Credit Amount Should Never Feel Like the Ceiling

The credit is a starting point designed to bring millions of new donors into K-12 scholarship giving. That is a good thing. The risk is that a number meant to open the door starts to feel like the size of the room.

Think about what each level of giving can do. Scholarship amounts vary by student, school and need, so treat these as illustrations rather than promises:

• A gift the credit fully covers helps close the gap between what a family can pay and what a school costs.
• $5,000 can cover a meaningful share of a student’s scholarship.
• $10,000 can help fund scholarships for more than one student.
• $50,000 can support many students for a school year.
• $100,000 or more can help scholarship students across an entire school or community.

The credit makes the first step easy. What happens after that is up to you, and for many donors the first gift is only the beginning of a much bigger commitment to families in their community and across the country.

Who Should Think About Giving Beyond the Credit

Nearly anyone who cares about expanding educational options can give beyond the credit, but a few groups tend to find it especially natural:

• Regular charitable givers who already donate several thousand dollars a year and want those dollars to count toward K-12 scholarships.
• High-income households who itemize and whose giving already exceeds the new 0.5% floor, so the amount above the credit can remain deductible.
• Families giving together who want their annual giving to reflect shared values.
• Business owners and executives who can pair a personal gift with company giving (company gifts don’t earn the credit, but they are regular corporate charitable contributions).
• Donors planning a legacy gift who want to support students at scale.

How to Get Started

If you are thinking about giving beyond the credit, a few simple steps help:

1. Decide on your total gift first. Start with what you want to accomplish for students, then look at the tax picture.
2. Plan to give in cash for the credit portion. The credit applies only to cash contributions made on or after January 1, 2027.
3. Talk with your tax professional. Especially if you itemize, give appreciated assets or give more than a few thousand dollars a year.
4. Choose a fund that matches your values. AFC Scholarship Fund offers funds for Catholic, Christian and Jewish schools, students with disabilities, military-connected families, students pursuing skilled trades and more.

You can use AFC Scholarship Fund’s impact calculator to see what different gift sizes could make possible.