Education Freedom Tax Credit in Colorado: How Donors Give and Families Qualify

What is the Education Freedom Tax Credit and how can you qualify in Colorado?

The Education Freedom Tax Credit is the federal scholarship tax credit created by Section 25F of the tax code. You give cash to a scholarship granting organization (SGO), and your federal income tax drops by the same amount, up to $1,700 a year. It starts with gifts made on January 1, 2027.

Donors qualify if they're U.S. citizens or residents who owe federal income tax and give cash to an SGO on a covered state's list, such as Colorado's. You designate the gift as a qualified contribution when you give. There's no donor income limit, and you don't have to live in Colorado.

Families qualify if household income is at or below 300% of area median gross income and the child is eligible to enroll in a Colorado public school. The scholarship comes from an SGO on Colorado's list, and each SGO runs its own application.

Colorado's opt-in status

Colorado is opted in and appears on the IRS advance-election list updated September 14, 2026. Governor Jared Polis said in early December 2025 that he would opt in. That made him one of the first Democratic governors to say yes. He called opting in a "no-brainer," and his office said the credit "creates an immense opportunity for Coloradans to support students in our state, but only if we opt in."

The next step is Colorado's SGO list. Under Treasury's proposed rules, the state must send it to the IRS by February 15, 2027. Until then, no organization is officially a Colorado SGO for the credit.

What it means for Colorado donors

Colorado has no state tax-credit scholarship. That keeps the federal math simple: your gift, up to $1,700, becomes a federal credit, with nothing subtracted first. Only a state credit for the same gift would reduce the federal credit. A state deduction does not.

Worked example. A Denver donor gives $2,500 to a Colorado SGO in 2027 and designates $1,700 as a qualified contribution. She claims a $1,700 federal credit. The other $800 may be deductible if she itemizes. Our guide on whether donating to an SGO is tax deductible explains the split.

What it means for Colorado families

For most Colorado families, this is the first broad scholarship program of its kind. Colorado has no voucher or ESA, and voters rejected Amendment 80 in 2024. Our Colorado scholarships guide covers what families can use today.

Federal-credit scholarships can pay for "qualified elementary or secondary education expenses." These include tuition, academic tutoring, special needs services, books, supplies and computer technology. Public school students can benefit too, for example through tutoring. Treasury says more guidance on qualified expenses, including homeschool costs, is coming. Each SGO decides what it funds.

ACE Scholarships says it expects its next application window to open around mid-November 2026.

Colorado timeline

• January 1, 2027: credit-eligible giving begins.
• February 15, 2027: Colorado's 2027 SGO list due to the IRS.
• 2027: SGOs award scholarships for the 2027-28 school year.
• January 31, 2028: SGOs send acknowledgements for 2027 gifts.
• Spring 2028: claim the credit on your 2027 return.

How to give and claim

1. Pick a Colorado SGO. ACE Scholarships has served Colorado since 2000. Seeds of Hope funds Catholic school students in the Denver area. Check the IRS SGO list when you give.
2. Give cash on or after January 1, 2027, and designate it for Colorado. Married? Each spouse gives separately.
3. Keep the acknowledgement with your donor number.
4. File Form 8525. See how to claim the federal scholarship tax credit, and use our checklist to donate to a scholarship fund wisely.

Edulist doesn't take donations. You give directly to the SGO. You can pledge on Edulist and we'll email you when Colorado's list is out. This page reflects Treasury's proposed rules as of October 13, 2026. It is not tax advice; ask your tax professional.