Education Freedom Tax Credit in North Carolina: HB 87, Donors and Families

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

The Education Freedom Tax Credit is the federal scholarship tax credit in 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. Gifts count starting January 1, 2027.

Donors qualify if they are U.S. citizens or residents who owe federal income tax and give cash to an SGO on North Carolina's list, or any covered state's list. You designate the gift as a qualified contribution. There's no donor income limit.

Families qualify for the scholarships if household income is at or below 300% of area median gross income and the child is eligible to enroll in a North Carolina public school.

North Carolina's opt-in status

North Carolina is opted in (veto overridden) and is on the IRS advance-election list updated September 14, 2026.

The path took ten months. Governor Josh Stein vetoed HB 87 on August 6, 2025. He said he intended to opt in himself "once the federal government issues sound guidance." The House overrode the veto 73-46 on May 20, 2026, and the Senate finished the job 30-19 on June 3, 2026.

HB 87 gives the job of building the SGO list to the NC State Education Assistance Authority (NCSEAA), the same agency that runs the Opportunity Scholarship and ESA+. NCSEAA must adopt rules by July 1, 2026, or within 120 days of federal guidance, whichever is later. Treasury's proposed rules came out October 2, 2026, and the 2027 list is due by February 15, 2027.

What it means for North Carolina donors

North Carolina has an income tax but no state scholarship tax credit. So nothing is subtracted from your gift before the $1,700 federal cap.

North Carolina donors have two distinct missions to choose from. Some SGOs will fund private school tuition. Others may focus on public school students. Stein has said he's working on a way for donors "who want to direct their federally reimbursed donations" to SGOs that serve public school students. You pick the SGO, but you can't earmark a gift for a specific child.

Worked example. A Raleigh teacher and her husband each give $1,700 in 2027: she to an SGO funding tutoring for public school students, he to one funding private school tuition. Both gifts are qualified contributions, and they claim $3,400 on their joint return.

What it means for North Carolina families

North Carolina already has two big state programs. The Opportunity Scholarship is open to every K-12 student and pays private school tuition. ESA+ serves students with disabilities and can be used by homeschoolers. Our North Carolina scholarships guide and Opportunity Scholarship guide cover both.

SGO scholarships add a third source, and they can reach families the Opportunity Scholarship doesn't. Public school students can use them for academic tutoring, books, supplies or computer technology. Private school families may be able to cover costs beyond tuition. Each SGO sets its own policies, and Treasury's guidance on homeschool costs is still coming.

North Carolina timeline

• January 1, 2027: credit-eligible giving begins.
• February 15, 2027: North Carolina's 2027 SGO list due to the IRS.
• January 31, 2028: SGO acknowledgements for 2027 gifts.
• Spring 2028: claim on your 2027 return.

How to give and claim

1. Watch for NCSEAA's SGO list, then confirm your SGO is on the IRS SGO list when you give. North Carolina organizations will appear in our SGO directory as they join.
2. Give cash on or after January 1, 2027, and designate it for North Carolina. Spouses each give 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.

Edulist doesn't take donations. You give directly to the SGO. You can pledge on Edulist and we'll email you when North Carolina's list is published. This page reflects HB 87 and Treasury's proposed rules as of October 13, 2026. It is not tax advice; ask your tax professional.