The question every thoughtful donor asks before they give is a simple one: where does my money actually go? For EFTC donations, the answer is cleaner than most people expect.
When you make a charitable contribution to a qualified Scholarship Granting Organization, the money moves from you to the SGO, and from the SGO to eligible students as scholarships. At least 90% of all contributions must be distributed as scholarships. No government agency handles or directs the funds at any point.
Step One: Your Contribution Arrives at the SGO
Your donation is received by the Scholarship Granting Organization — in the case of AFC Scholarship Fund, the scholarship arm of the American Federation for Children. The contribution is logged, attributed to your donor record, and processed in compliance with the federal requirements that govern SGO operations.
You receive written confirmation of your contribution, which you’ll use when filing your federal taxes. The contribution is a private charitable donation from the moment it leaves your account — it is not tax revenue, and it does not pass through any government agency.
Step Two: The SGO Distributes Scholarships
At least 90% of the contributions an SGO receives must be distributed as scholarships to eligible students. This requirement is federal — it’s a condition of the SGO’s qualification status, not a policy preference. An organization that fails to meet this threshold is not operating as a qualified SGO.
How Donor Contributions Flow
From every dollar donated to a qualified SGO:
90¢+
Must reach students as scholarships — by federal law
$0
Passes through any government agency
$1,700
Maximum federal tax credit for the donor at filing
For donors with at least $1,700 in federal tax liability. Consult a tax professional for your specific situation.
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.
Step Three: Students Access Educational Opportunity
Scholarships are awarded to eligible students based on established criteria — with priority under the EFTC framework given to lower-income families. The scholarship reaches the student’s family, not the school directly. The family then directs those funds to the educational program that fits their child.
Scholarship funds can be applied to tuition, fees, tutoring, curriculum, and other qualified educational expenses. AFC Scholarship Fund has invested more than $11 million since 2021 to connect 157,000 students across 12 states to programs that fit them.
Clearing Up a Common Misconception
What the EFTC Is Not
Some describe the EFTC as a mechanism to “redirect tax dollars” or “turn taxes into scholarships.” That is not an accurate description of how the credit works.
Your contribution is a charitable donation made from your personal or business funds — before your taxes are filed. The credit reduces your tax liability at filing, which means you pay less in federal taxes as a result of your gift. But the gift and the credit are separate events, and the gift is always private.
You are giving first. The government is acknowledging that gift afterward. That sequence is important — and it’s the sequence that makes the EFTC a legitimate charitable giving vehicle, not a tax manipulation scheme.
Your contribution is received by the SGO, processed in compliance with federal requirements, and distributed as scholarships to eligible students — at least 90% of all funds. No government agency handles the money.
No. A contribution to a qualified SGO is a private charitable donation. It moves from donor to SGO to eligible students — no government body handles or directs the funds at any point.
No. Your contribution is a private charitable donation made before your taxes are filed. The credit reduces your tax liability at filing — the gift and the credit are separate events. The donation comes from your funds, not from any tax payment.
