South Dakota Partners in Education Tax Credit and the Federal $1,700 Credit

How South Dakota's Partners in Education credit works

South Dakota created the Partners in Education Tax Credit Program in 2016 (SDCL chapter 13-65). It's a business program aimed at one industry. Any company that pays the insurance company premium and annuity tax can claim a credit for gifts to a participating scholarship granting organization (SGO).

The scholarships go to K–12 students attending accredited private schools, or tribally controlled schools, in South Dakota. Students must meet the program's household income test, which starts at 200% of the free or reduced-price lunch income standard, or be in foster care. Average awards can't exceed the state's per-student equivalent.

Who can claim it

Only insurers. South Dakota has no personal income tax and no general corporate income tax, so individuals and most other companies have no state tax for a credit to offset. The Division of Insurance FAQ notes that individuals and businesses can still donate to SGOs; they just don't get a state credit.

For individuals, the tax benefit arrives in 2027 with the federal scholarship tax credit.

The cap, allocations and timing

• $5 million a year. That's the total for all insurers combined (SDCL 13-65-3).
• Per-SGO allocations. By January 1 each year, the Division sets each SGO's maximum based on the share of certified enrollment at its partner schools.
• Check before giving. Before accepting a gift, the SGO must verify with the Division that the annual limit hasn't been reached.
• Annual or quarterly. Companies claim the credit on the annual premium tax return for the previous year's gifts. They can also use it to reduce a quarterly payment by naming the quarter when they give.
• Receipts. The SGO issues a Division-approved receipt, which the company submits with its claim. The SGO reports each insurer's gift to the Division within 30 days.

How it stacks with the federal $1,700 credit

South Dakota opted in to the federal credit and is on the IRS list of 2027 advance elections. For individuals, the math is simple because there's no state credit to subtract.

Under Treasury's proposed rules (October 2, 2026), your federal credit equals your qualified contributions minus any state credit for them, capped at $1,700. In South Dakota the state credit is zero for individuals:

Insurers and individuals can both support the same SGO without affecting each other's credits. The insurer uses the state program; individuals use the federal one.

South Dakota Partners in Education says the federal program will be "completely separate" from the state insurance premium program it runs, and that the state program "remains unchanged."

How to give in South Dakota, step by step

Individuals:

1. Pledge on Edulist so we can remind you when federal giving opens on January 1, 2027.
2. Pick an SGO on the IRS SGO list. It can be a South Dakota SGO or one listed by any other state that opted in.
3. Give cash on or after January 1, 2027, and designate it as a qualified contribution. Each spouse gives separately to reach $3,400.
4. Keep the acknowledgement with your unique donor number, due by January 31 of the next year.
5. File Form 8525 with your federal return. See how to claim the federal scholarship tax credit.

Insurance companies:

1. Contact the SGO to confirm credits are still available under its allocation.
2. Give, and specify the quarter if you want to reduce a quarterly payment.
3. Keep the Division-approved receipt and claim the credit on your premium tax return.

Choosing a South Dakota SGO

As of October 2026, the Division of Insurance lists one registered SGO: South Dakota Partners in Education. It says it intends to become a federal SGO for 2027, subject to the designation and certification steps. Before giving for the federal credit, confirm it appears on the IRS SGO list. Our guide to choosing a scholarship fund has a due-diligence checklist. Businesses comparing state programs should read business tax credit scholarships, and families can start with South Dakota scholarships.

For which states take part, see the states opted in tracker.

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