OBBBA Creates New Section 25F Tax Credit for Scholarship Donations

A little-discussed provision in the OBBBA created a new IRC Section 25F tax credit for individuals who make contributions to eligible scholarship granting organizations (SGOs). The maximum credit is $1,700 per year. It's up to each state to identify qualifying SGOs and state-level participation is optional. Qualifying SGOs fund scholarships for eligible K-12 students, meaning students who (1) are eligible to enroll in public elementary or secondary schools and (2) are members of households with income that does not exceed 300% of the median gross income for the area. The Section 25F credit is reduced by any state-level credit claimed for the same contribution. Taxpayers who take advantage of the Section 25F tax credit cannot also take the federal charitable deduction for the same contribution. Unused credits are permitted to be carried forward for up to five years. The program begins with respect to contributions made on or after January 1, 2027. For more information on this new tax credit, visit Tax Facts Online. Read More: Link to Q739.