§25F Qualified Elementary and Secondary Education Scholarships

Summary

You can get a federal tax credit for cash you give to certain nonprofit scholarship groups that pay for K–12 school costs. Only U.S. citizens or residents can claim it. The credit equals the total qualified donations you make in the year, but it cannot be more than $1,700. The federal credit is reduced by any state tax credit you already claimed for the same donation. If the credit is bigger than your federal tax limit, you may carry the extra forward for up to five years, using oldest credits first. Definitions you should know: covered State — a state that chooses to take part and send a list of approved groups to the Treasury; eligible student — a child from a household with income no more than 300 percent of the area median gross income the year before applying, who can enroll in public elementary or secondary school; qualified contribution — cash given to an approved scholarship group that uses it for in‑state scholarships; qualified elementary or secondary education expense — the school costs listed in section 530(b)(3)(A); scholarship granting organization — a 501(c)(3) nonprofit (not a private foundation) that keeps these donations separate, meets rules like giving scholarships to 10 or more students at different schools, spending at least 90% of its income on scholarships, only funding the allowed school costs, following priority rules for returning students and siblings, verifying income, not earmarking funds for individual students, and avoiding certain disqualified recipients. States must send a certified list of qualifying groups to the Treasury by January 1 each year, and the Treasury will write rules for enforcing and reporting these requirements.