Treasury counts 30 states signed up for a new federal tax credit for scholarship donations, according to Treasury Secretary Scott Bessent. The credit is worth up to $1,700 for one person and up to $3,400 on a joint return, and it begins with gifts made in 2027. A donor can give to a scholarship group in any state, not only the one where the donor lives.

The count comes from the Treasury and IRS announcement of October 1, 2026, in which Bessent said 30 states have already opted in and urged all 50 to take part.

Which states have signed up

The IRS keeps a list of participating states, current as of September 14, 2026. It names Alabama, Alaska, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Dakota, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.

Joining is voluntary. A state or the District of Columbia has to make an advance election to take part for 2027 and send the IRS a list of scholarship groups in the state. Under the temporary regulations, a state has until January 1, 2027 to file that election and until February 15, 2027 to submit its list, so the number of states could still grow.

The question for most households is simpler than the map. Has the home state opted in, and would a gift actually lower the tax bill? Anyone considering a donation should check the IRS list first, and then look at their own tax liability, because the credit works only against tax that is owed.

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A donor in any state can give to a group in a participating one

The IRS release says taxpayers may contribute to an eligible scholarship granting organization regardless of their state of residence. The proposed regulations add a condition. The group has to appear on the list of at least one participating state, and the donor cannot have known it failed the requirements.

The IRS describes a scholarship granting organization as generally a section 501(c)(3) public charity that keeps qualified contributions in a separate account and appears on a participating state’s list. The Treasury and IRS announcement estimates that about 96% of children in participating states would be eligible for scholarship money from the program.

So a retiree in a state that has not opted in is not shut out of the credit. That donor can give to a qualifying group in a state that did. The reverse is not automatic. A donor living in a participating state still has to check that the group they want to support is on the state’s list.

What the credit is worth, and when it is worth nothing

The credit is nonrefundable. The proposed rules say it cannot exceed the taxpayer’s tax liability for the year, so a filer with no tax to pay gets nothing back from it. Unused credit can be carried forward, but not past the fifth taxable year after the year it arose.

The limit is $1,700 per person. A married couple filing jointly could claim up to $3,400 if each spouse gave $1,700. The credit is also reduced by any state credit claimed for the same gift, and the part of a gift used for the federal credit cannot be deducted a second time as a charitable contribution.

Only cash counts. The proposal lists physical currency, checks, money orders, electronic transfers and after-tax payroll deductions, in U.S. dollars, and leaves out digital assets. The donor has to designate the gift as a qualified contribution when making it. Gifts of stock or other property do not qualify.

Donors report the credit on Form 8525, Federal Scholarship Tax Credit, and must list the donor number each group assigns. The groups are due to send a written acknowledgment by January 31 of the following year. If the donor number is missing, the IRS presumes no qualified gift was made.

The dates that matter

Nothing can be claimed for 2026. The IRS says taxpayers, states and scholarship groups may rely on the proposed regulations for contributions beginning January 1, 2027. The IRS page says individual taxpayers may be able to claim the credit beginning that day.

The rules are still being written. Comments on the proposed regulations are due December 1, 2026, and a public hearing is set for Tuesday, December 15, 2026, at 10 a.m. Eastern. The temporary regulations take effect December 1, 2026 and expire October 1, 2029. Both documents were filed for public inspection, with the temporary rules listed on October 1.

Anyone thinking about a gift this year should know that a 2026 donation does not count. The first gifts that can earn the credit are those made on or after January 1, 2027, so there is time to check a state’s status, confirm a group is on the list and look at the household’s tax picture before giving.

The IRS and Treasury estimate that by 2030 the program could draw more than 11 million taxpayers giving nearly $26 billion a year. Those numbers are projections, not what has been given. Education Secretary Linda McMahon called the program the largest expansion of school choice in history.

Would a scholarship gift cut a retiree’s tax bill?

A nonrefundable credit helps only a household that owes tax. For a retiree whose bill is already small after the standard deduction and the senior deduction, a generous gift can end up reducing nothing. The better question is how much tax the household actually owes before the credit comes into play.

That is a different job from the scholarship credit itself, and it is the one The Retirement Tax & Withdrawal Planner handles. It covers the senior deduction and four calculators for provisional income, the IRMAA tier, the required minimum distribution schedule and the Roth bracket fill. The provisional income calculator shows how much Social Security is taxed, which is where a retiree’s tax liability starts.

Get the senior deduction guide and four tax calculators to see what tax a credit could offset →

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This article was produced with AI assistance and edited for accuracy against the sources linked above.