Education Freedom Tax Credit
The Education Freedom Tax Credit (EFTC) is a once-in-a-generation opportunity to expand scholarships for students in every state. Beginning in 2027, donors can contribute up to $1,700 per year and reduce their federal tax bill by that same amount.
Instead of those dollars going straight to the IRS, they can help fund scholarships that give students access to schools and learning environments that better fit their needs.
How Does It Work?
- Every taxpayer in America is eligible to donate to a non-profit scholarship-granting organization (SGO) to receive the tax credit.
There is no annual aggregate cap nationwide. - Each taxpayer can donate up to $1,700 to an SGO and will receive a dollar-for-dollar federal income tax credit for that contribution. This tax credit is operated out of the Department of the Treasury, not Department of Education.
Who Benefits?
- Student eligibility is
300 percent of median gross income by area, which covers approximately 90 percent of the K-12 students in
every state. - A student must be eligible to enroll in a public elementary or secondary school.
What Should Donors Know?
- Every taxpayer with a federal tax liability can make donations to an SGO in any state in the country that has opted in
- If a donor lives in a state that has NOT opted in, the donor can send their contribution out of state
- Donors cannot earmark scholarships for an individual student
- Donors may earmark scholarships for particular schools
- Contributions to SGOs must be cash contributions.
What Should Schools Know?
- Private schools could see enrollment growth: As scholarships backed by these tax credits become available, private schools that participate in the program may attract students who previously couldn’t afford tuition — broadening access and boosting school choice.
- Builds on Alabama’s existing school choice programs:
EFTC doesn’t replace what’s already in place — families eligible for state programs like the AAA scholarships or the CHOOSE Act can still use those benefits alongside federal tax-credit scholarships (subject to program rules). That effectively layers more financial resources for private school access.
What the Education Freedom Tax Credit Means for Alabama Families and Donors
Big changes are coming to school choice and Alabama families stand to benefit in a major way. The new Education Freedom Tax Credit, launching in 2027, creates a federal tax credit for people who donate to scholarship-granting organizations like the Alabama Opportunity Scholarship Fund (AOSF).
Who Is Eligible for the Education Freedom Tax Scholarship?
The Education Freedom Tax Credit (EFTC) is a federal tax credit that lets Alabama taxpayers reduce their federal income tax liability by donating to a qualified Scholarship Granting Organization (SGO) like the Alabama Opportunity Scholarship Fund. When you give, you get a dollar-for-dollar federal tax credit, not just a deduction, for your contribution.
