TL;DR

  • The EFTC (ECCA / §25F) doesn’t pay schools directly — it gives donors a federal credit for giving to an SGO, which awards scholarships your families can use for tuition and other qualified expenses.
  • Your school is a destination for scholarship dollars, not a credit claimant and not (usually) an SGO.
  • Families qualify if their household income is at or below 300% of area median gross income.
  • It only works in states that have opted in, and the program launches January 1, 2027.
  • The schools that benefit most will partner early with one or more SGOs and help eligible families apply.

How EFTC dollars reach a school

The Education Freedom Tax Credit — also called ECCA, the Federal Scholarship Tax Credit, and IRC §25F — is built around donors and Scholarship Granting Organizations. The path to your classroom looks like this:

  1. A donor gives cash to an SGO and claims a federal tax credit (up to $1,700 per return).
  2. The SGO pools donations and awards scholarships to income-eligible K–12 students under federal priority rules.
  3. A family applies to the SGO, is verified, and receives a scholarship.
  4. The scholarship is typically paid to the school or provider on the student’s behalf for qualified education expenses, including tuition.

Qualified expenses follow the §530(b)(3)(A) list — tuition, fees, tutoring, books and supplies, and more — which is why private-school tuition is squarely covered.

Schools are not SGOs

This trips up a lot of administrators. Your school does not claim the credit and, in most cases, should not try to be its own SGO. An SGO must be a separate 501(c)(3) public charity, must fund 10 or more students who don’t all attend the same school, must spend at least 90% of income on scholarships, and cannot earmark gifts for specific students. A single school can’t satisfy the multi-school requirement on its own.

The practical move for most schools is to partner with one or more established SGOs that serve your area or your sector (for example, a faith-based or special-needs network). If you do want to explore launching an affiliated SGO, start with our how to start an SGO guide.

What your families need to qualify

  • Income at or below 300% AMGI. Based on the prior calendar year’s household income and family size. The SGO verifies this — see scholarship eligibility.
  • Eligibility to enroll in a public K–12 school. The standard federal eligibility test.
  • An SGO serving your state. Families apply to the SGO, not to your school, for the scholarship itself.
Renewals come first. Federal law gives award priority to students who received a scholarship the prior year, then to their siblings. For schools, that means EFTC scholarships are well-suited to supporting continuity of enrollment, not just first-year recruitment.

How to prepare your school

  1. Confirm your state is participating. Use the state status map. No opt-in, no scholarships.
  2. Identify SGO partners. Find SGOs serving your region or mission and understand their application calendars and award criteria.
  3. Map your eligible families. Many families don’t realize 300% of AMGI reaches well into the middle class. Help them understand they may qualify.
  4. Align billing and enrollment. Be ready to receive scholarship payments on a student’s behalf and to coordinate verification documents with the SGO.
  5. Communicate the timeline. Donations count from January 1, 2027; families should be in an SGO’s pipeline before then. See the EFTC timeline.

For the SGOs you partner with: coordinating applications, income verification, awards, and disbursement to schools is exactly what SGO Software is built to handle — useful to know when you’re evaluating which SGOs are ready for the 2027 launch.

A note for faith-based schools

Because §25F runs through private charitable donations rather than state appropriations, it has generally been framed as reaching religious schools the way any charitable giving does. Some states, however, are debating additional conditions (such as nondiscrimination provisions) on SGOs operating within their borders. Those state-level rules — not the federal credit itself — are the variable to watch. Keep an eye on your state’s specific implementation, and read ECCA vs. state tax credits for how the layers interact.

Frequently asked questions

Do private schools claim the EFTC credit?

No. The §25F credit is claimed by individual donors who give cash to a Scholarship Granting Organization (SGO). Schools receive scholarship payments on behalf of students; they don't claim the credit themselves.

Can a school start its own SGO?

It can help form an affiliated SGO, but the SGO must be a separate 501(c)(3), must fund at least 10 students who don't all attend the same school, and cannot earmark donations for particular students. Many schools instead partner with existing multi-school SGOs.

Which families at my school qualify?

Students in households at or below 300% of area median gross income (the AMGI used in IRC §42) for the prior calendar year, who are eligible to enroll in a public elementary or secondary school. The SGO verifies income; the scholarship covers qualified education expenses including tuition.

Does my state have to opt in for my school to benefit?

Yes. Scholarships only flow in covered States — states that have elected to participate and submitted a list of qualifying SGOs to the U.S. Treasury. Check your state's status before building plans around the program.