Education Freedom Tax Credit in Tennessee: Not the Same as the Education Freedom Scholarship

Updated Oct 13, 2026 · By Edulist · 6 sources

Federal scholarship tax credit (Section 25F) in Tennessee at a glance

Credit value: Dollar-for-dollar federal income tax credit for cash gifts to an SGO on Tennessee's list, up to $1,700 per taxpayer per year ($3,400 for a married couple filing jointly if each spouse gives, under proposed rules). Nonrefundable; five-year carryforward.
Cap: $1,700 per taxpayer per year, no statewide cap. Tennessee has no personal income tax and no state scholarship tax credit, so nothing is subtracted before the cap.
Deadline: Give on or after January 1, 2027; claim in the year you give. Tennessee's 2027 SGO list is due to the IRS by February 15, 2027 under the proposed rules.
With the federal credit: Nothing to stack. Tennessee has no personal income tax and no state tax-credit scholarship, so a Tennessee donor's full gift up to $1,700 counts toward the federal credit.

How to claim the Federal scholarship tax credit (Section 25F) in Tennessee

Step 1
Choose an SGO on Tennessee's list, and confirm it's on the IRS SGO list when you give.
Step 2
Give cash on or after January 1, 2027, and designate it as a qualified contribution for Tennessee.
Step 3
Keep the acknowledgement with your unique donor number (due by January 31, 2028).
Step 4
File Form 8525 with your 2027 federal return.

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

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 Tennessee'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 Tennessee public school.

Two "Education Freedom" programs in Tennessee

The names are almost identical, so Tennessee families and donors mix them up.

	Education Freedom Scholarship	Education Freedom Tax Credit
Level	State	Federal
Who benefits directly	Families	Donors (families get SGO scholarships)
Paid for by	State budget	Private gifts, offset by a federal credit
Amount	$7,530 per student for 2026-27	Donor credit up to $1,700 per taxpayer
Run by	Tennessee Department of Education	IRS, with SGOs on Tennessee's list
Status	Applications closed for 2026-27	Gifts from January 1, 2027

Our Education Freedom Scholarship guide covers the state program in full.

Tennessee's opt-in status

Tennessee is opted in and appears on the IRS advance-election list updated September 14, 2026. The next step is the state's SGO list. Tennessee hasn't published one, and under Treasury's proposed rules the 2027 list is due by February 15, 2027. Until a Tennessee organization is on that list, gifts to it won't earn the credit.

What it means for Tennessee donors

Tennessee has no personal income tax and no state scholarship tax credit. So the federal credit is the whole benefit, and nothing is subtracted first.

Worked example. A Knoxville couple owes $8,000 in federal tax for 2027. Each spouse gives $1,700 to a Tennessee SGO and designates it as a qualified contribution. They claim $3,400 on Form 8525, and their federal tax drops to $4,600. With no state income tax, there's nothing to track on a state return.

What it means for Tennessee families

Tennessee already runs three state programs. The Education Freedom Scholarship pays private school tuition for students statewide. An ESA serves lower-income students in Memphis, Nashville and Chattanooga. An Individualized Education Account serves students with certain disabilities. See our Tennessee scholarships guide.

SGO scholarships can fill gaps. A family whose private school costs more than $7,530 could use an SGO award for the rest, if the SGO allows it. Public school students can use SGO scholarships for academic tutoring, books, supplies or computer technology. Qualified expenses also include special needs services. Each SGO decides what it funds, and Treasury's guidance on homeschool costs is still coming.

Tennessee timeline

January 1, 2027: credit-eligible giving begins.
February 15, 2027: Tennessee'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

Watch for Tennessee's SGO list, then confirm your SGO is on the IRS SGO list when you give. Tennessee organizations will appear in our SGO directory as they join.
Give cash on or after January 1, 2027, and designate it for Tennessee. Spouses each give separately.
Keep the acknowledgement with your donor number.
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 Tennessee's list is published. This page reflects Treasury's proposed rules as of October 13, 2026. It is not tax advice; ask your tax professional.

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Sources

Questions

Is the Education Freedom Tax Credit the same as Tennessee's Education Freedom Scholarship?

No. The Education Freedom Scholarship is a state program run by the Tennessee Department of Education that pays $7,530 per student in 2026-27 toward private school tuition. The Education Freedom Tax Credit is a federal credit for donors who give to scholarship granting organizations.

Has Tennessee opted in?

Yes. Tennessee is on the IRS list of states with an advance election for 2027, updated September 14, 2026. It still has to submit its 2027 SGO list by February 15, 2027, under Treasury's proposed rules.

Can a family use both the Education Freedom Scholarship and an SGO scholarship?

Federal law doesn't bar it, as far as we can find. An SGO scholarship could help with costs above the state award, such as the rest of tuition, tutoring or books. Each SGO sets its own policies, so ask before you apply.

Tennessee has no income tax. Can I still use the credit?

Yes. It's a federal credit, so it reduces your federal income tax. Because there's no state income tax or state scholarship credit, nothing is subtracted from your gift first. You do need to owe federal tax, since the credit is nonrefundable.

Which Tennessee SGOs can I give to?

Tennessee hasn't published its SGO list as of October 2026. Once it does and the organizations appear on the IRS SGO list, you can give. Our SGO directory will add Tennessee organizations as they join.

Give to a Tennessee SGO in 2027

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