Virginia Tax Credit Scholarship: Education Improvement Scholarships Tax Credit

Virginia's scholarship tax credit, in brief

Virginia's Education Improvement Scholarships Tax Credit has been around since 2013. You give money or marketable securities to a scholarship foundation approved by the Virginia Department of Education (VDOE). You then receive a state tax credit worth 65% of the gift. The foundations award scholarships to lower-income students, students with disabilities and eligible pre-K children.

Two things make Virginia different from most states right now:

• It's set to expire. The statute covers taxable years beginning before January 1, 2028. Unless lawmakers extend it, 2027 is the last year to give.
• Its federal status is uncertain. Former Governor Glenn Youngkin made Virginia the first state to formally opt in to the new federal scholarship tax credit in January 2026. In October 2026, Governor Abigail Spanberger said, "We're continuing to evaluate the program and where Virginia is and what our options are moving forward."

Who can claim it

The credit works against several Virginia taxes: individual income tax, corporation income tax, bank franchise tax, insurance premiums license tax and the tax on public service corporations. Credits earned by a partnership, S corporation or LLC are allocated to owners by their ownership share.

Amounts and caps

Approved foundations must give scholarships only to students in families at or below 300% of the federal poverty guidelines (400% for students with disabilities) or to eligible pre-K children. They must pay out at least 90% of tax-credit gifts received each July 1 to June 30 by the following June 30. Scholarships can't be limited to one school.

Preauthorization and deadlines

Virginia requires preauthorization before you give:

1. You or the foundation request preauthorization for a specific credit amount from the Superintendent of Public Instruction, on a VDOE form.
2. VDOE issues a preauthorization notice, which goes with your donation to the foundation.
3. You must give within 180 days, or the notice is void.
4. Within 40 days, the foundation returns the notice to VDOE certifying the amount, type and date of your gift.
5. VDOE issues your tax credit certificate within 30 days of approval. You claim it on Schedule CR.

The $25 million cap runs on the state fiscal year (July 1 to June 30), not the calendar year.

How it stacks with the federal $1,700 credit

From January 1, 2027, any individual can claim up to $1,700 in federal credit for cash gifts to an SGO on the IRS list. Under Treasury's proposed rules, any state credit for the same qualified contribution is subtracted before the $1,700 cap.

If Virginia completes its election. Virginia is on the IRS advance-election list. Under the proposed rules, it must still submit its 2027 SGO list by February 15, 2027. If it does, a Virginia foundation on that list could earn both credits on one cash gift.

Worked example. Ana owes $6,000 in Virginia tax and $12,000 in federal tax. She gets preauthorization and gives $4,860 in cash to a foundation on Virginia's federal SGO list, designated as a qualified contribution.

• Virginia credit: 65% of $4,860 is $3,159.
• Federal credit: $4,860 minus $3,159 is $1,701, so she gets the full $1,700.

Ana gets $4,859 in total credits for a $4,860 gift. With a smaller $2,000 gift, the Virginia credit would be $1,300 and the federal credit only $700.

If Virginia doesn't complete its election. No Virginia foundation would be a federal SGO for 2027. Your Virginia credit wouldn't affect your federal credit at all. You could still claim up to $1,700 per taxpayer by giving separately to an SGO listed by another opted-in state. See the states opted in tracker.

Stock gifts earn the Virginia credit but never the federal credit, which is cash only.

How to give, step by step

1. Pick an approved foundation from VDOE's annual list, such as the Diocese of Arlington Scholarship Foundation, RenewaNation or the Anna Julia Cooper Scholarship Foundation.
2. Request preauthorization for the credit you want, before you give.
3. Give within 180 days and send the preauthorization notice with your gift.
4. Wait for your certificate from VDOE, then claim the credit on Schedule CR.
5. For the federal credit in 2027, check whether your foundation is on the IRS SGO list, designate up to $1,700 per spouse as a qualified contribution, and keep the acknowledgement with your donor number. Our guide to claiming the federal scholarship tax credit walks through Form 8525.

Businesses, which face no per-donor limit in Virginia, should also read business tax credit scholarships. Under the proposed federal rules, gifts made through a partnership or S corporation don't earn the federal credit.

Choosing a foundation

Ask each foundation how quickly it pays out scholarships, which students it serves and whether it plans to seek a place on Virginia's federal SGO list. Our checklist for choosing a scholarship fund covers the rest. Families can find programs on Virginia scholarships.

Edulist doesn't take donations. You give directly to the foundation. Pledge on Edulist and we'll email you as Virginia's federal status becomes clear. This page reflects Virginia law and Treasury's proposed rules as of October 13, 2026. It is not tax advice; ask your tax professional.