A: The measure included in the budget bill that was signed into law on July 4th allows individuals to receive a dollar for dollar tax credit for donations of up to $1,700 per year to scholarship granting organizations (SGOs) offering K-12 scholarships.

A: There is no overall cap for the amount of tax credits available per year (so the tax credits will not “run out”). However, each taxpayer can only claim up to $1,700 in tax credits per year.

A: Any individual with a federal tax liability who files a Federal 1040 Form could apply for an education freedom tax credit for a donation to an eligible SGO.

A: Taxpayers could donate up to $1,700 per year, and there is no minimum donation required to receive a tax credit.

A: The value of a charitable deduction depends on your marginal tax rate and whether you itemize or apply the standard deduction. For example, if you are in the 22% tax bracket and itemize, a $1,000 donation saves you $220. However, the tax credit would allow you to reduce your tax liability dollar for dollar by the amount of your donation. For example, the same $1,000 donation under the tax credit would reduce your tax liability by $1,000.

A: Regulations will be promulgated by the U.S. Treasury Department, which will release instructions and rules regarding the tax credits. We will be sure to keep you posted throughout the process.

A: Under the law, individuals can receive an education freedom tax credit for donations made after December 31, 2026 and taken against income on their 2027 federal tax return filed in 2028.

A: Gifts made through DAFs are not eligible for a federal education freedom tax credit since the donor receives a tax benefit upon investing money in a DAF rather than when a donation is made through the DAF.

A: No, stock gifts are not eligible for the federal education freedom tax credits.

A: The bill does not allow for an individual to claim tax credits for the same donation on both their state and federal taxes. However, you could make a donation to an SGO that administers a state tax credit program and claim a tax credit on your state tax return, and then make a second donation to the same SGO and claim a federal education freedom tax credit on the second donation.

A: Yes, if the SGO is approved by that state to fund scholarships for eligible students within that state. The federal education freedom tax credits will be awarded through the U.S. Treasury Department rather than your state government or the SGO’s state government.