Every private school leader I know has had some version of this conversation: a family that belongs in their community, a child who is thriving in their classrooms, and a tuition bill that is simply out of reach. In Ohio, scholarship-granting organizations (SGOs) have been the quiet hero in that story since 2021, turning the generosity of donors into real opportunity for families.

On January 1, 2027, that story gets even better, when a new federal tax credit begins rewarding individuals who give to SGOs that fund K–12 scholarships. It is called the Federal Scholarship Tax Credit, and many people know it as the Education Freedom Tax Credit. Whatever you call it, it may be the most significant new tool for tuition assistance that our schools have seen in a generation. It’s a great question, and one that doesn’t have a one-size-fits-all answer.

In Plain Language, This is What the Credit Is

Created by the federal tax law enacted in July 2025 and clarified by proposed Treasury and IRS regulations released on October 1, 2026, the credit works like this:

• A dollar-for-dollar credit. Individuals who give to a qualifying SGO can reduce their federal income tax by up to $1,700. A married couple filing jointly can claim up to $3,400 if each spouse gives at least $1,700.
• This is a credit, not a deduction. That distinction is important! A deduction lowers taxable income; a credit lowers the tax bill itself. For donors who owe at least that much in federal income tax, a $1,700 gift effectively costs them nothing out of pocket. 
• No credit is wasted. The credit can reduce a donor’s federal tax bill to zero, but not below it. If a donor gives $1,700 but owes only $1,000 in federal income tax that year, the remaining $700 is not lost; it can be applied to their taxes in any of the next five years. 
• Gifts must come from individuals. For the federal credit, the gift needs to be made by a person and in their own name. Unlike the state of Ohio’s SGO credit, which business owners can claim through their LLC, partnership, or S corporation, the federal credit applies only to personal gifts. A business owner who gives through the company for the Ohio credit will need to give personally to receive the federal credit.
• Donors can live anywhere. A grandparent living in Fort Myers or an alumnus in Boston can give to an SGO serving students in Ohio. This opens the door even wider to current and potential donors!

Who an SGO Helps

Scholarships funded through the federal credit go to students in states that have chosen to participate. As of late October 2026, the IRS lists 30 participating states, and Ohio is among them. Students qualify when their household income is at or below 300% of the area median income where they live, adjusted for family size. This is a very broad window, and the U.S. Treasury estimates that about 90% of American children live in households that meet the income limit. For a family of four, the eligibility ceiling ranges from approximately $107,000 to over $616,000 depending on the cost of living in your state and county. 

Two features of this Federal SGO deserve special attention for school leaders:

• First, the SGO must give priority to students who received a scholarship the prior year and to their siblings, which means this can become a source of continuity for a family, not just a one-time gift. 
• Second, gifts cannot be earmarked for a specific child. This is about building a pool of opportunity, not sponsoring an individual student.

About Ohio’s SGO Tax Credit

Ohio created its own SGO tax credit in the 2021 state budget, allowing individuals to give up to $750 (or $1,500 for a married couple filing jointly) and receive a dollar-for-dollar credit on their Ohio income taxes. In just a few years, Ohio donors have embraced it, and our schools have built real momentum. 

The federal credit is designed to work alongside programs like Ohio’s. 

However, a donor cannot claim both a state and a federal credit for the same dollar amount, but a larger gift can capture both. The amount credited at the state level is subtracted first, and the remainder can count toward the federal credit, up to $1,700.

Ohio Examples:  

• A single individual who gives $2,450 to a school could receive a $750 Ohio credit and a $1,700 federal credit, with the SGO handling the gift according to both programs’ rules. 
• A married couple filing jointly, with each spouse giving $2,450 in their own name ($4,900 total), could receive up to $1,500 from Ohio and $3,400 federally.

NOTE: Every donor’s situation is different, and donors should confirm with their tax advisor and their SGO before giving.

The power of an SGO

The Diocese of Columbus’s Emmaus Road Scholarship Fund was certified as Ohio’s very first SGO in December 2021. In its first year, 2022, this SGO raised about $1.9 million from roughly 2,000 donors, with gifts supporting families across the diocese’s 52 schools. In 2025, Emmaus Road Scholarship Fund raised $5.6 million and surpassed $15 million in total donations since it launched. 

Emmaus Road shows what is possible when an entire faith community rallies around one clear invitation. 

Things to Pay Close Attention To

Some schools throughout Ohio have certified their own School Foundation as an SGO. If you are one of those schools, you will want to look carefully at the new federal requirements, which currently ask SGOs to:

• Spend at least 90% of their funds on scholarships (Ohio’s standard is 50+%),
• Keep federal-credit gifts in a separate account,
• Award scholarships to at least 10 students who do not all attend the same school.
  • For schools that have established their own foundation, and have certified their Foundation as their SGO, this may be the most important change to understand. A foundation that serves only its own students will likely need to either broaden who it serves or partner with a multi-school SGO to offer donors the federal credit. The good news is that your foundation can continue its important work with Ohio-credit gifts. The federal credit simply may need a second SGO partner.

If you are part of a private, Catholic, or independent school in Ohio, this is the time to ask your leadership the following questions:

• Will your SGO be on the list Ohio submits to the IRS? (due February 15, 2027)
• Has it registered in the IRS SGO portal?
• How will it designate and track federal-credit gifts separately from Ohio-credit gifts?

Why Schools Need to Start the Conversation Now with Their Donors 

A new tax credit is only as powerful as the number of people who understand it and use it. Many of your donors, parents, and grandparents will have never heard of this credit, and the ones who have may not know how it applies to your school.

The U.S. Treasury and the IRS estimate that by 2030, more than 11 million donors could give about $26 billion a year, enough to fund roughly 2 million full-time scholarships. 

Schools that communicate early, clearly, and warmly will help their families capture that opportunity. Schools that wait may find their donors’ credits have already gone elsewhere.

Here is a simple roadmap to ensure everyone in your CRM and community is aware:

When	What to Focus On
Now – Dec 2026	– Confirm that your SGO will be on Ohio’s federal list with your school leadership. Here is a link to Ohio’s current state-certified SGO list: LINK  – Train your advancement/development team, head of school, and board on the new rules for the federal SGO. – Draft your school’s FAQs and sample donor language.
January 2027	– Develop and launch a series of announcements across all your communication platforms (“A new way to give”) so parents, grandparents, alumni, and past donors all know about the federal credit.
Feb – Apr 2027	– Tax season! When donors and their advisors are already thinking about taxes and planning for the year, this is a great time to share your FAQs with CPAs and financial planners in your network and community.
Spring – Summer 2027	– During financial aid and enrollment season, make sure your admissions teams are educating families that scholarships may be available, and how to apply through your SGO.
Summer – Fall 2027	– When you are planning your 2027/28 SY marketing and development plans, be sure to weave the credit into your annual appeals, during Grandparents Day, and always at alumni cultivation and stewardship events, as a companion to (not a replacement for) their annual giving.
Nov – Dec 2027	– During your end-of-year / giving season push, be sure to remind potential donors that in order to qualify for the Federal Tax Credit, gifts must be made by December 31 to count for 2027. – In Ohio, gifts to SGOs may be made up until April 15th to qualify for the state tax credit. If your state has a State SGO program, be sure to check with your State’s taxation department for the state’s specific deadline.  – Then starting in January, begin stewarding your SGO donors so they become recurring SGO donors for years, and decades, to come.

Talking About this New Opportunity with Warmth and Clarity

The most effective messages will lead with mission, not mechanics. Donors do not give to tax codes; they give to children, to families, and to communities and schools they love. A few phrases we have found that tend to resonate:

• “You can choose where part of your federal taxes goes, and you can choose our students.”
• “Every gift helps a family say yes to the education they believe in.”

And always, encourage donors to consult their own tax advisor. Your role is to inform and inspire, not to give tax advice.

It All Starts with a Donor Saying Yes! 

The federal scholarship tax credit is still taking shape, and some details will be refined in the months ahead. But the heart of it is clear: more families will have a real choice about their children’s education. And because every scholarship starts with someone who said yes, this new credit gives thousands more people the chance to say it.

This blog is for general information and is not tax or legal advice. Rules are based on proposed Treasury and IRS regulations released October 1, 2026, which may change when final rules are issued. Donors and schools should consult qualified tax and legal advisors about their specific circumstances.