Understanding the

Education Freedom Tax Credit (EFTC)

For more than 50 years, Catapult Learning has partnered with private schools to provide high-quality instructional services and navigate complex education policies. With the introduction of the historic Education Freedom Tax Credit (EFTC), we are closely monitoring federal guidance to help our partners effectively maximize this significant investment. Because the EFTC supports students in public, private, and religious settings, Catapult is uniquely positioned to help schools across all sectors align their services, expand access, and fully leverage these valuable new resources.

Below you will find your questions answered regarding the EFTC. For further information or support, feel free to submit our Contact Form to speak to one of our funding specialists.

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FAQs

Your EFTC Questions Answered

The Education Freedom Tax Credit (EFTC), established under H.R. 1 (the One Big Beautiful Bill Act), is a permanent, uncapped federal income tax credit that allows individuals to receive a dollar-for-dollar credit for contributions to approved Scholarship Granting Organizations (SGOs). These SGOs then provide scholarships to eligible K–12 students for qualified educational expenses. The program is designed to expand educational access across public, private, and religious school settings and complement—not replace—existing state programs.

Individual taxpayers (not corporations) can contribute up to $1,700 annually to an SGO and receive a dollar-for-dollar federal tax credit, directly reducing their tax liability.

  • Contributions must be made by individuals who are U.S. citizens or residents.
  • Guidance is still pending on whether joint filers may claim up to $3,400.
  • SGOs pool these contributions and award scholarships based on student need.
  • Scholarship amounts are not capped at $1,700 and can exceed that amount depending on the need.

SGOs are 501(c)(3) nonprofit organizations responsible for administering the program. They must:

  • Ensure compliance, reporting, and program integrity
  • Raise tax-credit-eligible donations
  • Award scholarships to eligible students

Additional requirements include:

  • Serving at least 10 students across at least two schools
  • Distributing at least 90% of revenue as scholarships

Eligible students are those in grades K–12 whose household income is at or below 300% of Area Median Income (AMI). This threshold includes many middle-income families, expanding access beyond traditionally low-income populations.

EFTC scholarship funds are highly flexible and can be used for a wide range of qualified educational services and supports that benefit students across public, private, and religious school settings. Scholarship funds can be used for a wide range of qualified K–12 educational expenses, including:

  • Tuition and fees
  • Books, supplies, and equipment
  • Academic tutoring and instructional services
  • Special education services
  • Technology (devices and internet access)
  • Transportation and uniforms
  • Room and board (if required by the school)
  • Extended day or supplementary programs
  • These expenses apply across public, private, and religious school settings.


Catapult Learning offers a range of programs and services aligned to these allowable uses, including high-dosage tutoring, intervention programs, special education support services, and extended learning opportunities.
Schools and families interested in learning more about how Catapult services align with EFTC-eligible expenses are encouraged to connect with our team for additional information and resources.
Scholarship funds can be used for a wide range of qualified K–12 educational expenses, including:

  • Tuition and fees
  • Books, supplies, and equipment
  • Academic tutoring and instructional services
  • Special education services
  • Technology (devices and internet access)
  • Transportation and uniforms
  • Room and board (if required by the school)
  • Extended day or supplementary programs
  • These expenses apply across public, private, and religious school settings.

Yes. The EFTC is intended to work alongside existing state scholarship or tax credit programs, not replace them. However:

  • Tax benefits cannot be duplicated
  • Federal credits may be reduced if a state-level credit is also claimed.

States must formally opt into the program for students to benefit.

  • If a state does not opt in, students in that state cannot receive scholarships
  • Donors may still contribute to SGOs, but funds cannot be used for students in non-participating states

States began the opt-in process in January 2026, and participation varies, with some states approving, vetoing, or still considering legislation.

  • Contributions eligible for tax credits begin January 1, 2027
  • SGOs will begin awarding scholarships at that time

The program is currently in the federal rulemaking phase, with final guidance pending from the U.S. Treasury and IRS following a public comment period that closed in December 2025.

Schools should begin preparing now to ensure smooth implementation:

  • Build relationships with SGOs and community partners
  • Confirm financial systems can track scholarship funds
  • Train admissions and business office staff
  • Establish internal processes for managing scholarships
  • Communicate proactively with families about eligibility and opportunities

Early planning will reduce administrative challenges once funding begins.

Successful implementation depends on coordination among:

  • Donors (who fund scholarships)
  • SGOs (who administer funds and ensure compliance)
  • Schools (who support families and manage funds)
  • Community partners (who help drive awareness and access)

Schools play a critical role in helping families understand eligibility and apply for scholarships.

Treasury and IRS are expected to clarify these areas in the forthcoming final rule. In the meantime, schools should prepare with flexibility and monitor updates closely. While the Federal Scholarship Tax Credit (FSTC) has been authorized, key implementation details are still pending final guidance from the U.S. Treasury and IRS, creating uncertainty as stakeholders prepare for 2027. Key open questions include:

  • Operational timing – Details on SGO approval, scholarship distribution timing, and fund flow processes.
  • Interaction with state programs – How federal and state tax credits will work together, including limits on claiming both benefits.
  • Reporting and compliance requirements – What SGOs and schools must track, verify (e.g., income eligibility), and report, as well as audit expectations.
  • Contribution limits for joint filers – Whether married couples filing jointly can claim up to $3,400 remains unclear.
  • State-specific implementation –  How states will opt in, oversee SGOs, and establish timelines and requirements for participation.

Let’s Start the Conversation

Interested in connecting with a funding expert regarding ETFC? Contact us today to get started.