Federal Scholarship Tax Credit (Education Freedom Tax Credit) in Tennessee

Last updated: October 21, 2026

Short answer: Starting January 1, 2027, Tennesseans can claim a federal income tax credit for cash gifts to a scholarship granting organization (SGO) on Tennessee's state list. Up to $1,700 per individual; up to $3,400 for a married couple filing jointly if each spouse gives $1,700, under proposed rules.

How the credit works

• It is a credit, not a deduction. Under 26 U.S.C. 25F(a), the credit equals the amount of qualified contributions made during the year, subject to the limit in 25F(b)(1) (26 USC 25F).
• Amount. Up to $1,700 per individual; up to $3,400 for a married couple filing jointly if each spouse gives $1,700, under proposed rules (Federal Register 2026-20277).
• Cash only, to a listed SGO. A qualified contribution is a charitable contribution of cash to an SGO that funds scholarships for eligible students solely within the state where it is listed (25F(c)(3)).
• State list required. The SGO must be a 501(c)(3) public charity included on the list a participating ("covered") state submits to the IRS (25F(c)(1), (c)(5), (g)).
• No double benefit. A gift claimed for this credit cannot also be deducted as a charitable contribution under section 170 (25F(e)).
• State credit offset. The federal credit is reduced by any state tax credit claimed for the same gifts (25F(b)(2)).
• Unused credit. If the credit is more than your tax liability allows in a year, the excess carries forward, but not past the fifth taxable year after the year it arose, used first-in first-out (25F(f)). How this interacts with your return depends on your situation; ask your tax advisor.
• Who benefits. Scholarships go to eligible students in households at or below 300 percent of area median gross income who are eligible to enroll in a public school (25F(c)(2)). Scholarships cover qualified K-12 expenses (25F(c)(4)).

How to claim the scholarship tax credit

1. Confirm the SGO is on Tennessee's list. Gifts count only if the SGO is on the list Tennessee sends to the IRS for that year (25F(c)(5)(D), (g)). As of October 21, 2026, Tennessee has not published a list (TDOE).
2. Give cash on or after January 1, 2027. Only cash contributions qualify (25F(c)(3)).
3. Talk with your tax advisor. Your own result depends on your tax situation. Try our credit calculator.

The Tennessee option

Tennessee has opted to participate in the federal program, and the Tennessee Department of Education is building the state's SGO list (TDOE). By law, a listed SGO funds scholarships only within the state where it is listed (25F(c)(3)).

Education Choice Fund is a 501(c)(3) public charity; its Tennessee SGO listing is in formation. It is not yet on Tennessee's SGO list. It plans to fund scholarships for eligible students at Tennessee Christian partner schools. We do not accept gifts or pledges before January 1, 2027 and our listing on Tennessee's SGO list. Education Choice Fund is registered with the Tennessee Secretary of State as required by law, Registration No. CO55725.

Join the notice list to hear when giving opens. School leaders can recommend their school.

Guides

• Federal Scholarship Tax Credit (Education Freedom Tax Credit) in Tennessee: Brief for CPAs
• Get law and guidance updates

FAQ

What is the Education Freedom Tax Credit?
It is the federal scholarship tax credit in 26 U.S.C. 25F. It gives individuals a federal income tax credit for cash gifts to scholarship granting organizations on a participating state's list, starting January 1, 2027.

How much is the credit?
Up to $1,700 per individual; up to $3,400 for a married couple filing jointly if each spouse gives $1,700, under proposed rules.

Is it a deduction or a credit?
A credit. A gift claimed for the credit cannot also be taken as a charitable deduction.

How do I claim the scholarship tax credit?
Give cash to an SGO on Tennessee's list on or after January 1, 2027 Ask your tax advisor.

What if my tax bill is smaller than my gift?
Under 25F(f), unused credit carries forward to later years, but not past the fifth taxable year after the year it arose. Your tax advisor can tell you how this applies to you.

Can I give to Education Choice Fund now?
No. We do not accept gifts or pledges before January 1, 2027 and our listing on Tennessee's SGO list.

Is Education Choice Fund an approved Tennessee SGO?
No. Education Choice Fund is a Tennessee SGO in formation and is not yet on Tennessee's list.

Sources

• 26 U.S.C. 25F: https://www.law.cornell.edu/uscode/text/26/25F
• Federal Register 2026-20277, Federal Scholarship Tax Credit (proposed/temporary regulations): https://www.federalregister.gov/documents/2026/10/02/2026-20277/federal-scholarship-tax-credit
• Tennessee Department of Education, Scholarship Granting Organizations: https://www.tn.gov/education/about-the-tdoe/scholarship-granting-organizations.html