Compliance
Understanding Eligible Scholarship Contributions: How States Are Opting in to the FSTC Program
The Federal Scholarship Tax Credit (Section 25F) under OBBBA enables qualified federal credits for contributions to Scholarship Granting Organizations—but only if your state opts in. Learn which states have joined and how to claim.
By NomadicTax Research Team • 5-8 min read • June 21, 2026
## What is the Federal Scholarship Tax Credit (FSTC)?
The FSTC is a **federal tax credit** enacted under the One, Big, Beautiful Bill allowing eligible taxpayers to receive a credit up to **$1,700** for contributing to qualified Scholarship Granting Organizations (SGOs). It’s intended to support elementary and secondary education under Section 25F. ([irs.gov](https://www.irs.gov/newsroom/more-than-half-the-us-states-signed-up-to-participate-in-the-federal-scholarship-tax-credit-program-enacted-under-the-one-big-beautiful-bill?utm_source=openai))
## State Election Matters
Not every state participates. Only states that **elect to participate** can list their SGOs, and only those SGOs in participating states can receive contributions eligible for the federal credit. As of **June 8, 2026**, **27 states** have opted in, including Texas, Florida, Virginia, Ohio, and more. ([irs.gov](https://www.irs.gov/newsroom/more-than-half-the-us-states-signed-up-to-participate-in-the-federal-scholarship-tax-credit-program-enacted-under-the-one-big-beautiful-bill?utm_source=openai))
## Who Can Claim It & How Much You Get
- Eligible taxpayers must **contribute** to a **listed SGO** in a participating state.
- The max credit is **$1,700**, reducing your federal tax liability dollar for dollar.
- If the credit exceeds your liability, excess is generally **not refunded**, unless specific state or SGO rules allow carryover (check state-specific details).
## Examples
- Emily in Florida donates $1,500 to a listed SGO—she can claim a $1,500 federal credit.
- Frank in a non-participating state cannot claim any federal credit even if he contributes to an SGO.
- Gina in Ohio donates $2,000, but since credit caps at $1,700, she can only claim the $1,700 maximum credit.
## Action Steps
- **Check your state’s status** via IRS.gov to see whether your state has opted in and which SGOs are approved.
- **Verify SGO eligibility** before donating. Some organizations may not meet requirements.
- **Plan timing of contributions**—donate in a year when you have sufficient tax liability to take full credit.
- **Consult state rules**, as some may allow carryforward or impose restrictions beyond federal requirements.
## Implications for Giving and Education Policy
- This credit incentivizes charitable giving toward education through SGO channels.
- States opting in gain flexibility in supporting scholarships without directly appropriating funds.
- Donors in participating states effectively stretch every dollar by getting both a charitable deduction (if applicable under state law) and a federal credit.
**Bottom-line**: If you're in one of the 27 participating states and seeking education-based giving strategies, the FSTC offers immediate tax value—but state participation is the gating factor.