Tax-Credit Scholarships for Families: How SGO-Funded Scholarships Work and How to Apply

How tax-credit scholarships work

Tax-credit scholarships move private donations to families through nonprofits:

1. A donor gives to a scholarship granting organization (SGO). States use other names too: STO in Arizona and Iowa, SSO in Georgia, SO in Pennsylvania.
2. The donor gets a tax credit, often 50% to 100% of the gift, against state taxes (or, from 2027, up to $1,700 against federal taxes).
3. The SGO reviews applications from families against its rules: income, grade, school, need.
4. The SGO pays the school or an approved provider. Some newer programs pay into a digital wallet.

Families never deal with the donor. You apply to the SGO, much like a private school financial aid application.

Which states have tax-credit scholarships?

EdChoice counts 22 tax-credit scholarship programs in 18 states. Florida's FTC Scholarship and Missouri's MOScholars accounts are also funded by tax-credited donations.

Also: Kansas, Louisiana, Nevada, Rhode Island and South Dakota. Each state page lists the scholarship organizations we know of.

The federal scholarship tax credit: what changes in 2027

The 2025 federal law added Section 25F to the tax code. Starting January 1, 2027:

• Donors in any state can claim a credit of up to $1,700 each ($3,400 for a married couple when each spouse gives, under Treasury's proposed rules).
• SGOs must be on the SGO list of a state that opted in. As of October 13, 2026, 31 states had opted in. See which states opted in.
• Students qualify if they're eligible to enroll in public school and their household income is no more than 300% of area median gross income. Treasury estimates about 95% of U.S. children fall under that limit.
• Scholarships can fund qualified K–12 expenses under the Coverdell rules, not just tuition.

Under Treasury's proposed rules (published October 2, 2026; not final), SGOs would:

• Pay school charges like tuition directly to the school.
• Pay other vendors directly only after verifying them, or use a "qualified digital wallet".
• Reimburse families only with a receipt.
• Prioritize students who got a scholarship the year before, then their siblings.

Our federal scholarship tax credit guide covers the donor side.

How to apply for an SGO scholarship

1. Find SGOs that serve your state. Your state's page lists them, and the IRS will publish a list of SGOs for the federal credit.
2. Check each SGO's rules. Some fund only one school network, one subject or students below a lower income cap.
3. Gather income proof. Under the proposed federal rules, SGOs verify income with pay stubs, tax returns, IRS transcripts or W-2s, or with a recent SNAP, TANF, WIC, Section 8 or SSI award letter.
4. Apply early. Returning students and siblings get priority, so first-year funds can run out.
5. Reapply each year.

How Edulist helps families apply

Edulist lets you save the products and programs you want to a wishlist, then apply once: your household and learner details are entered one time and reused for each SGO, with each program's own questions grouped by recipient. Edulist Match ranks the SGO programs that accept each product. Every award decision stays with the SGO. Browse SGO profiles such as Step Up For Students and ACE Scholarships.