Indiana School Scholarship Tax Credit: 50% State Credit Plus the Federal Credit

How Indiana's school scholarship tax credit works

Indiana has offered a credit for gifts to scholarship granting organizations since 2009. Under IC 6-3.1-30.5, when you give to an SGO for use in a school scholarship program certified by the Indiana Department of Education, you get a credit equal to 50% of the gift against your Indiana tax.

The money must go to K–12 scholarships. Gifts used for college, or for the early education grant pilot program, don't qualify.

Who can claim it

The Department of Revenue says the credit is "available for individuals or corporations who donate" to SGOs. Under Bulletin #108, a "taxpayer" is any individual or entity with Indiana tax liability.

• Individuals claim it on their Indiana income tax return.
• Corporations, banks and insurers claim it against income, financial institutions or insurance premium tax.
• Pass-through entities that can't use the credit may pass it to their owners.
• IRA charitable distributions can qualify, and gifts from donor-advised funds qualify under specific rules in Bulletin #108.

The $18.5 million cap and timing

There's no application window, but the statewide cap is a hard limit. The state "cannot award more than $18.5 million in credits this fiscal year (July 1, 2026–June 30, 2027)." As of October 13, 2026, the Department of Revenue showed $2,737,802 awarded and $15,762,198 remaining.

The credit is claimed for the taxable year in which you give. If you plan a large gift, check the DOR's running total first and ask your SGO whether credits are still available.

To make sure the gift counts, either designate in writing (before or when you give) that it's for the SGO's school scholarship program, or get the SGO's written confirmation that it will be used only for that program.

How the Indiana credit stacks with the federal $1,700 credit

Governor Mike Braun opted Indiana in to the federal scholarship tax credit in January 2026. Indiana is on the IRS list of 2027 advance elections. From January 1, 2027, Indiana taxpayers can also claim up to $1,700 per person in federal credit for gifts to SGOs on the IRS SGO list.

Under Treasury's proposed rules, a state credit for the same qualified contributions is subtracted first, then the $1,700 cap is applied. Because Indiana's credit is 50%, a $3,400 gift fills both:

A married couple filing jointly can do the same with $3,400 each, for $3,400 in Indiana credits and $3,400 federal.

What if you give more?

Say you give $5,000. Indiana credit: $2,500. Qualified contributions after the state credit: $2,500, so your federal credit is capped at $1,700. Total credits: $4,200. The remaining $800 is out of pocket, though it may be partly deductible. The proposed ordering rule can help: if you designate only $3,400 as a federal qualified contribution, Indiana's credit is applied first to the undesignated part.

Business gifts

A corporation's gift earns the Indiana credit but never the federal credit. Under the proposed rules, a partnership's or S corporation's gift doesn't count toward an owner's federal credit either. To get both, give personally.

How to give in Indiana, step by step

1. Pledge on Edulist so we can remind you when federal giving opens.
2. Find an approved SGO. IDOE lists approved SGOs on its Choice Scholarship program site. From 2027, also confirm the SGO is on the IRS SGO list.
3. Check credit availability on the Department of Revenue's school scholarship credit page.
4. Give and designate. Designate the gift for the school scholarship program (Indiana) and as a qualified contribution (federal).
5. Keep records: the SGO's confirmation, and the federal acknowledgement with your unique donor number, sent by January 31.
6. File. Schedule IN-OCC on your Indiana return, and Form 8525 with your federal return. See how to claim the federal scholarship tax credit.

Choosing an Indiana SGO

Indiana SGOs must serve students at more than one school. The federal rules add more: 90% of income spent on scholarships, a 300%-of-area-median-income cap, and priority for returning students and siblings. Ask whether your SGO will be on Indiana's 2027 federal list, what it funds and how quickly awards reach families. Our guide to choosing a scholarship fund has a checklist. Families can see programs in Indiana scholarships. Businesses comparing states should read business tax credit scholarships.

For the federal rules, see the federal scholarship tax credit explained and our states opted in tracker.

Edulist doesn't take donations. You give directly to the SGO. This page reflects Indiana guidance and Treasury's proposed federal rules as of October 13, 2026. It is not tax advice. Ask your tax professional.