The Internal Revenue Service now lists thirty states as having elected into the new federal scholarship tax credit, and the credit opens to donors on Jan. 1, 2027. The credit is worth up to $1,700 per person for cash gifts to approved scholarship groups, it is nonrefundable, and any unused amount carries forward for up to five years. The state count comes from Treasury Secretary Scott Bessent, who announced it with the Oct. 1 proposed rules.
Taxpayers who want to use the credit have to give to the right kind of charity in the right kind of state, and the state’s election alone is not enough to start claiming it. Anyone planning a 2027 gift needs to confirm that the state is on the list, that it has filed its roster of approved scholarship groups with the IRS, and that the receiving group appears on that roster.
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Which thirty states have opted in?
The IRS’s participating-states page, dated Oct. 22, 2026, says the listed states “have elected to participate under Section 25F for 2027.” It names thirty: Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
The page lists the states in two columns and does not print a total of its own, so the figure of thirty is a count of the names. It matches Bessent’s statement in the Oct. 1 IRS release, IR-2026-117: “Thirty states have already opted in, and we encourage all 50 states to participate.”
The count has moved. An earlier IRS release, IR-2026-76 from June 8, put the number at 27. Three names on the current list, Kansas, Kentucky and North Carolina, do not appear in that June roster. IRS CEO Frank J. Bisignano said then that the agency was “hopeful that additional states will decide to participate,” so the list can keep growing before and after the credit starts.
How much can a donor claim, and what happens to the part not used?
Section 25F of the tax code, enacted in 2025, applies to tax years ending after Dec. 31, 2026. The IRS release says the credit is up to $1,700 for an individual. On a joint return the IRS says each spouse may be able to claim $1,700, for as much as $3,400 on the return.
Because the credit is nonrefundable, it can reduce the tax a person owes to zero but cannot produce a refund by itself. That is where the carryforward matters. The IRS release says unused section 25F credit may be carried forward for up to five years, so a gift larger than one year’s tax bill is not simply lost.
The IRS has not put a dollar figure in its release on the statutory household-income limitation that applies to the scholarships themselves. That limit governs which students a scholarship group may serve, not who may donate, and the agency says the proposed rules explain how to apply it.
What makes a gift count as a qualified contribution?
The gift must be cash, paid to a scholarship granting organization, or SGO, in a participating state. The IRS release says an SGO generally must be a section 501(c)(3) public charity that keeps qualified contributions separate, meets the statute’s scholarship and operating requirements, and appears on its state’s SGO list. A multistate SGO qualifies under a safe harbor if at least 85 percent of its activities are scholarship-granting.
The IRS page for the credit adds the donor steps. A donor should check that the group is approved and in a participating state, tell the group that the payment is a qualified section 25F contribution, and file Form 8525 with the required SGO and donor numbers. The agency also says taxpayers cannot claim the credit for gifts in a state until that state elects to participate and submits its approved SGOs.
Are the rules final?
Not entirely. The main document released Oct. 1 is a set of proposed regulations, which are not yet final. The IRS says taxpayers, states and SGOs may rely on them for qualified contributions beginning Jan. 1, 2027. Companion temporary regulations cover state elections, SGO certification, electronic registration, donor acknowledgements and reporting.
Treasury and the IRS project that by 2030 the program could reach 600 to 700 SGOs and more than 11 million taxpayers, with nearly $26 billion in annual qualified contributions and up to 2.2 million scholarships a year. Those are agency projections, not results. They also estimate that about 96 percent of children in participating states would be eligible for scholarship funds.
The practical test comes after Jan. 1. A state that has elected in but not yet filed its SGO list leaves donors waiting, and a gift made to a group not yet approved does not earn the credit. Which of the thirty states will have a filed list on the day giving begins will decide how quickly the credit is usable in practice.
Is a scholarship gift part of the 2027 tax plan?
A $1,700 credit is one more line in a retiree’s tax picture, and it only helps if the bill it offsets is not already shrunk by other items. Missing how Social Security, brackets and the Medicare surcharge line interact can cost more than the credit saves.
Cut Your Retirement Tax Bill: 12 Moves shows each income line that sets a retiree’s tax bill, in 2026 numbers. It includes the new $6,000 senior deduction ($12,000 for a couple) for 2025 through 2028 and a worksheet for how much of a Social Security benefit is taxed, and it notes that one dollar over the Medicare surcharge line can cost more than $1,100 a year per person.
This article was produced with AI assistance and edited for accuracy against the sources linked above.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
