The Federal Scholarship Tax Credit: What Ohio Families and Donors Need to Know Before January 1, 2027
If you’re an Ohio taxpayer who supports school-choice scholarships, or you’re a family looking for help with eligible K–12 education expenses, a new federal tax credit may be important to your 2027 planning.
Beginning January 1, 2027, the Federal Scholarship Tax Credit (FSTC) will allow individual taxpayers to claim a dollar-for-dollar federal income tax credit of up to $1,700 for qualifying cash contributions to approved Scholarship Granting Organizations (SGOs).
Ohio has opted into the program, and Ohio residents may be able to combine the new federal credit with Ohio’s existing scholarship donation credit. Because this program is new, planning ahead matters. You’ll want to understand the timing, contribution requirements, eligible organizations, and differences between the federal and state credits before making a donation.
Important: This article provides general information only. It isn’t tax advice, legal advice, or a recommendation to donate to any particular organization. Tax rules and administrative guidance may change. Please consult EMC Financial Management Resources, LLC or another qualified tax professional about your specific situation.
What Is the Federal Scholarship Tax Credit?
The FSTC was created under the One Big Beautiful Bill Act (P.L. 119-21) and takes effect on January 1, 2027.
Under the program:
- Individual taxpayers may contribute cash to an approved SGO.
- The contribution may qualify for a dollar-for-dollar federal income tax credit.
- The maximum federal credit is $1,700 per individual tax return.
- States must voluntarily opt into the program.
- Participating states must provide a list of qualifying SGOs.
- Nonprofit SGOs collect contributions and award scholarships to eligible K–12 students.
The important distinction is that this is a tax credit, not merely a deduction. A deduction reduces the income subject to tax. A credit directly reduces your tax liability (dollar for dollar, subject to the applicable requirements and limits).
However, the program doesn’t begin until January 1, 2027. A contribution made before that launch date is NOT a 2027 FSTC contribution.
For current federal program information, review the IRS Federal Scholarship Tax Credit guidance.
Ohio Has Opted Into the Federal Program
Ohio has officially opted into the federal scholarship tax credit program. Governor Mike DeWine authorized Ohio’s participation, making Ohio one of more than 30 states participating ahead of the January 1, 2027 launch.
That means Ohio residents should be able to consider qualifying contributions to approved Ohio SGOs when planning for 2027. The federal program still depends on the organization meeting the applicable requirements, so you shouldn’t assume that every education-related charity automatically qualifies.
Before you donate, take these steps:
- Confirm that the organization is an approved or qualifying SGO for the federal program.
- Confirm that the organization is certified for Ohio’s state scholarship donation credit.
- Make sure your contribution is made in the appropriate form (the federal program covers cash contributions).
- Keep your donation receipt and related records.
- Discuss the contribution with your tax professional before filing.
What Can Scholarship Funds Pay For?
Scholarship funds collected by SGOs may support eligible K–12 students with expenses such as:
- Private school tuition
- Public school enrichment
- Academic tutoring
- Special-needs services
- Technology
- Transportation
Depending on state guidelines, funds may be used across different learning environments, including:
- Private schools
- Faith-based schools
- Charter schools
- Certain public or hybrid educational models
The specific availability of each use depends on the applicable state guidelines and the student’s eligibility. Families shouldn’t assume that every scholarship can be used for every listed expense.
Student eligibility may depend on state and income requirements. The provided federal program information describes eligibility for students from families earning 300% or less of the area gross median income, along with other applicable requirements.
Ohio Residents May Be Able to Stack Two Credits
Ohio residents have an additional planning opportunity because Ohio already offers a separate Ohio Scholarship Donation Credit.
The federal and state programs are separate credits with different limits and different tax effects:
1. Federal Scholarship Tax Credit
The federal credit:
- Starts January 1, 2027
- Provides up to $1,700 per tax return
- Reduces your federal income tax liability
- Requires a cash contribution to an approved Ohio SGO
- Applies to eligible contributions under the federal program
- Directs scholarship funds to qualifying K–12 students, including students from families earning under 300% of the area’s gross median income
2. Ohio Scholarship Donation Credit
Ohio’s existing credit:
- Is active now
- Provides up to $750 for individuals
- Provides up to $1,500 for married couples filing jointly
- Reduces your State of Ohio income tax liability
- Requires a monetary donation to a certified Ohio SGO
- Prioritizes low-income families at or below 300% of the federal poverty level
- Includes organizations listed on the Ohio Attorney General’s SGO Certification List
Because these credits apply to different tax liabilities, an Ohio taxpayer may be able to stack the two credits when the contribution and organization qualify under both programs. That doesn’t mean every taxpayer will receive the maximum benefit. Your income, filing status, tax liability, contribution timing, and the organization’s status all matter.
Federal and Ohio Scholarship Credit Comparison
| Feature | Ohio State SGO Credit | Federal Scholarship Credit (FSTC) |
|---|---|---|
| Max Individual Credit | $750 | $1,700 |
| Max Joint Credit | $1,500 | $1,700 |
| Applies To | State of Ohio Tax Liability | Federal Tax Liability |
| Student Eligibility | Priority to families ≤ 300% of Federal Poverty Level | Limited to families < 300% of Area Median Income |
| Eligible Uses | Private school tuition & fees | Tuition, fees, tutoring, and supplies |
The programs use different eligibility standards, so you’ll want to review both before making assumptions about how scholarship funds will be awarded.
How to Identify a Qualifying Ohio SGO
Ohio’s Attorney General maintains a list of certified Scholarship Granting Organizations. The 2026 Ohio certification list includes 50 active organizations.
You can review the Ohio Attorney General’s Scholarship Granting Organization Certification List before donating.
For federal planning, you should also monitor the IRS FSTC page for applicable federal information and approved-organization guidance.
Don’t rely solely on an organization’s marketing materials. Before you contribute, confirm:
- The organization is on the applicable Ohio certification list.
- The organization qualifies under the federal program, if you’re seeking the federal credit.
- The contribution will be used in a way that satisfies the relevant program requirements.
- You’ll receive documentation showing the date and amount of your contribution.
A Practical Planning Timeline for Ohio Donors
If you’re considering a contribution, use this process:
Review your charitable-giving goals.
Decide whether supporting K–12 scholarships fits your family’s or business’s charitable priorities.Review your tax situation.
Consider your federal and Ohio tax liabilities, filing status, and other credits you may claim.Check the SGO lists.
Review the Ohio Attorney General’s certified list and federal guidance before donating.Pay attention to timing.
The new federal credit starts on January 1, 2027. A contribution made before that date is NOT eligible for the new 2027 federal program.Keep complete records.
Save receipts, confirmation emails, contribution statements, and information about the SGO.Review the contribution with a professional.
Tax credit rules can be technical, and your result may differ from another taxpayer’s result.
Why Planning Ahead Matters
The FSTC is new for 2027. That means approved organizations, administrative procedures, documentation requirements, and filing instructions may require careful review as the launch approaches.
If you’re considering year-end charitable giving, don’t wait until you’re preparing your return to ask whether a contribution may qualify. The timing of the contribution and the status of the receiving organization can make a significant difference.
You should also avoid treating the $1,700 amount as an automatic refund. The credit is designed to reduce federal income tax liability, and your actual tax result depends on your complete tax picture.
At EMC Financial Management Resources, LLC, we help individuals and families look at tax decisions in context, not as isolated transactions. Our tax preparation and planning services are designed to help you plan ahead, understand your options, and avoid surprises.
Your Next Steps
If you’re an Ohio donor or family interested in the Federal Scholarship Tax Credit, take action now:
- Review the IRS Federal Scholarship Tax Credit information.
- Review the Ohio Attorney General’s SGO Certification List.
- Identify whether you’re considering a donation before or after January 1, 2027.
- Gather your federal and Ohio tax information.
- Ask whether a contribution may qualify for one or both credits.
- Schedule a conversation with a qualified tax professional before you donate.
The most important point is simple: January 1, 2027 is the federal launch date. If you’re considering school-choice giving, start reviewing your options now so you can make an informed decision when the program begins.
Need help evaluating how a potential contribution fits into your broader tax plan? Contact EMC Financial Management Resources, LLC for personalized guidance.
This article is general educational information and is not tax, legal, or financial advice. The Federal Scholarship Tax Credit and Ohio Scholarship Donation Credit are subject to applicable rules, eligibility requirements, and official guidance. Please consult a qualified professional about your specific situation before making a contribution or claiming a credit.