Federal Scholarship Tax Credit & SGOs
Helping Indiana education foundations understand the federal scholarship tax credit, connect with trusted partners, and navigate emerging opportunities for public school students.
Last reviewed: October 21, 2026. Sources: IRS announcement (Oct. 1, 2026) and federal proposed regulations (Oct. 2, 2026).
What is the Federal Scholarship Tax Credit?
The Federal Scholarship Tax Credit, sometimes called the Education Freedom Tax Credit, was established under Section 25F of the Internal Revenue Code. Beginning in 2027, eligible individual taxpayers may qualify for a federal income tax credit of up to $1,700 per taxpayer per year for qualified cash contributions to an eligible Scholarship Granting Organization (SGO). Eligibility for the credit depends on federal rules, state participation, the organization's qualifying status and the donor's circumstances.
An SGO is a qualifying charitable organization that receives contributions and provides scholarships for eligible K–12 students' qualifying education expenses. Scholarships are not limited to private-school tuition: subject to applicable rules, eligible expenses may include academic tutoring, books, educational equipment, certain technology, transportation and other qualifying educational services.
Sources: IRS Notice 2025-70; Treasury/IRS proposed regulations, Oct. 2, 2026. Expense eligibility remains subject to final guidance and individual circumstances.
Why should education foundations pay attention?
Education foundations are already trusted partners to public schools, families and local donors. The new program could create opportunities to support additional educational experiences for eligible students, but participation also brings decisions about organizational structure, governance, accounting, student eligibility, privacy, reporting and administration.
Understand
Learn the distinction between existing foundation grants and scholarships and the new federal SGO framework.
Explore
Consider your foundation's capacity, district partnership, student needs and possible role in the program.
Connect
Learn from Indiana foundations and school business officials at different stages of readiness.
Prepare
Follow state and federal developments before making commitments or communicating tax-credit eligibility to donors.
For broader operational considerations, see the NAEF National SGO Network resources.
Start with NAEF
The National Association of Education Foundations (NAEF) is an important source of education-foundation-specific learning, implementation information and national expertise. Through its charitable partner, the National School Foundation Association (NSFA), NAEF also provides information about a locally led affiliate SGO model offering formation assistance, technology, training and ongoing support.
An INAPEF membership benefit: INAPEF provides regular NAEF membership for its member foundations at no additional membership charge. That means members can take advantage of NAEF's member education and resources, including eligible members-only programming.
Please note: Regular NAEF membership is different from participating in the NSFA SGO affiliate network. Affiliate participation has its own application, fees, requirements and approvals.
Explore NAEF's National SGO Network NSFA Affiliate InformationNAEF maintains the current network handout and program details on its own website. Please refer there for the latest costs, availability and onboarding information rather than relying on older presentations.
What are we watching in Indiana?
State participation and the identification of eligible SGOs are essential parts of the federal program. For Indiana foundations, important practical questions include how organizations are listed or approved, what documentation will be needed, how school districts and SGOs can coordinate appropriately and how state-specific procedures will work.
- State processes: How Indiana will administer SGO listing and communications with eligible organizations.
- Student eligibility: How income, household and school eligibility will be verified under the applicable rules.
- Foundation–district coordination: How student information, privacy protections and program responsibilities will be handled.
- Operational readiness: What governance, accounting, reporting, audit and technology practices organizations will need.
Through its advocacy pillar, INAPEF helps members stay informed about emerging policy and protect opportunities for public education. We do this through training and collaboration with peers, school business officials and national experts. This page is an informational resource, not an application portal or a confirmation that any organization is qualified to accept federal tax-credit contributions.
Sources: Federal proposed regulations and IRS implementation announcement.
Learning & Conversations
Federal Scholarship Tax Credit: An Indiana Conversation
INAPEF members will participate in an Indiana Association of School Business Officials (IASBO) webinar exploring what is known, what remains uncertain and how school business officials and education foundations are approaching the decisions ahead.
Program details and registration: Coming soon. We will add the IASBO registration link and confirmed program information here when available.
Continuing the Conversation
INAPEF anticipates additional learning and peer-to-peer discussion opportunities as federal guidance and Indiana implementation progress. We have developed a task force of members helping guide our efforts to share reliable information and connect foundations with trusted resources. Watch this page and INAPEF member communications for updates.
Trusted Resources
Our recommended starting point for foundation-focused information, the NSFA model and links to its latest handout.
Information about joining the NSFA affiliate SGO network, including its current registration information.
A federal overview of the proposed regulations and scheduled 2027 launch.
The full proposed regulation text, published October 2, 2026. These are proposed, not final, rules.
Early federal guidance and the statutory framework for the scholarship tax credit.
Questions or insights to share?
Are you exploring an SGO model or navigating decisions at your foundation or district? INAPEF welcomes your questions and experiences as we build opportunities for shared learning across Indiana.
Contact INAPEF