New Federal Tax Credit for Scholarships: What You Need to Know About the 2025 Bill
July 14, 2025
SALT Cap Litigation and What It Means for Pennsylvania’s EITC Donors
September 11, 2025
As part of the One Big Beautiful Bill Act passed by Congress, the federal government has created a new federal tax credit program under Internal Revenue Code § 25F, designed to expand educational opportunity across the country.
Starting in 2027, individual donors will be eligible for a dollar-for-dollar federal tax credit, up to $1,700 per year, for contributions made to approved Scholarship Granting Organizations (SGOs). These donations will fund K–12 scholarships for private school tuition and, in many cases, homeschooling expenses.
North Carolina Opts-In
States must elect to participate (“opt into”) the federal program. Participating states must submit an annual list of certified SGOs to the IRS/Treasury.
On July 29, 2025, North Carolina became the first state to opt into the new federal tax credit program by passing House Bill 87, the Educational Choice for Children Act (ECCA).
Key provisions of HB 87 include:
- State Oversight: The State Education Assistance Authority (SEAA) will manage and publish an annual list of qualifying SGOs and submit that list to the U.S. Treasury.
- Qualified Scholarships: Scholarships may cover elementary and secondary education expenses, including homeschooling, as permitted under federal law.
- Effective Date: The program will apply to federal tax years beginning after December 31, 2026.
This move positions North Carolina to give taxpayers access to federal tax incentives for supporting private education through approved nonprofit organizations.
Friends of Education: Ready to Serve
Friends of Education, an approved Scholarship Organization in Pennsylvania, is well-positioned to qualify as an approved federal SGO. Our infrastructure already meets many of the anticipated compliance requirements under § 25F, including:
- Scholarship eligibility documentation
- Donation tracking and reporting
- Independent board governance
- Annual audits and disclosures
Although Pennsylvania has not yet joined the federal program, Friends of Education is tracking IRS rulemaking, Pennsylvania legislative or administrative action, and developments in other states that may opt in.
Our Commitment to Donors and Families
Whether through Pennsylvania’s EITC programs or upcoming federal tax credit opportunities, Friends of Education is committed to transparency, compliance, and purpose-driven giving. Our role is to streamline the tax credit participation for individuals and businesses while serving as a trusted link between donors and families who rely on educational support.
Want to Learn More?
If you have questions about the new federal tax credit or the Pennsylvania EITC tax credit program, email us at info@pataxcredits.org
