The Treasury Department and the Internal Revenue Service have issued temporary regulations for a new federal tax credit for donations to scholarship groups, and the rules take effect December 1. The credit itself is for contributions made in 2027 and later tax years. The regulations, TD 10057, were published October 2 in the Federal Register and are set to expire October 1, 2029.
Four dates that are easy to confuse
The document carries several dates, and each means something different. It was published October 2, 2026. The temporary regulations are effective December 1, 2026. The text says they apply on or after September 1, 2026. And the credit covers qualified contributions made in 2027 and later taxable years.
That means nobody can claim the credit for a gift made this fall. The December 1 date is when the rulebook starts to operate, not when a donor can first collect a tax benefit.
What section 25F provides
The credit is section 25F of the tax code, added by section 70411 of Public Law 119-21, the law known as the One, Big, Beautiful Bill Act. It is a nonrefundable federal income tax credit for U.S. citizens and residents who make qualified contributions to scholarship granting organizations. The regulations define a qualified contribution as a charitable cash contribution the donor designates as qualified at the time of giving, reduced by the value of any goods or services received in return. Digital assets do not count as cash.
For anyone who gives to scholarship funds, the planning question is what has to be in place before a 2027 gift can earn the credit, and two things sit outside the donor’s control. The first is the donor’s own tax position: because the credit is nonrefundable, it can only reduce income tax owed, so a household with little or no tax liability gets less out of it. The second is where the donor lives, since the credit works only if the donor’s state takes part. A donor who plans a 2027 gift should check whether the state has opted in, and whether the recipient organization is on that state’s list.
A nonrefundable credit only helps if there is income tax for it to offset, and for a retiree that depends on how withdrawals and Social Security stack up in 2027. The Retirement Tax & Withdrawal Planner includes four calculators (provisional income, IRMAA tier, RMD schedule, Roth bracket fill) that work through how a year of withdrawals and Social Security taxation stack up.
The dollar limit in the companion proposal
The temporary regulations do not state a dollar limit on the credit. A companion proposed rule published the same day, document 2026-20277, says the credit “may not exceed” $1,700 per individual per taxable year. A proposed rule is not final, and the IRS is taking written comments on it until December 1, with a public hearing set for December 15.
The governor decides whether a state participates
The regulations make the state’s role explicit. An election to take part is made by the governor, or by a person or agency the state designates, and it covers only one calendar year: “an election to participate under section 25F is made only for a single calendar year.” For 2027, a state has to file an advance election by January 1, 2027, and then complete it by submitting its list of scholarship granting organizations by February 15, 2027. For later years, the election window runs through the last three months of the prior year, with a deadline of 11:59 p.m. on January 1.
A scholarship granting organization, under the regulations, has to be located in a participating state and appear on that state’s list. “Located in a State” means the organization is authorized to do business there and complies with the state’s charitable organization laws. The text also refers to the group’s status as a public charity under section 501(c)(3), or a pending application for that status, and to a separate account for qualified contributions. A donor in a state that does not take part has no list of eligible organizations to give to.
Who to ask at the IRS
The document names two contacts for questions about the regulations: Constance Chien, at (202) 317-7009, and Andrew Fahmy, at (202) 317-6487. Neither is a toll-free number. The Federal Register page is an unofficial rendering, and the official text is the PDF posted on govinfo.gov.
Preparing for a 2027 scholarship gift
The free starting point is the rule itself, which readers can find through the Federal Register by searching for TD 10057 or “Federal Scholarship Tax Credit.” The temporary rules and the proposed rules are two separate documents, and the $1,700 limit appears in the proposal.
Before making a gift, a donor can confirm three facts in writing: that the state has made its election for the year, that the organization is on the state’s list, and that the receipt shows the gift was designated as a qualified contribution. The regulations subtract the value of any goods or services received, so a receipt that shows a dinner or an auction item will lower the amount that counts.
Because the credit is nonrefundable, a donor should also look at last year’s tax return to see how much income tax was owed. The Treasury’s temporary regulations, effective December 1 and expiring October 1, 2029, remain the operative text until final rules replace them.
A nonrefundable credit starting with 2027 gifts
The new scholarship credit can only cut income tax a household actually owes, so a retiree who gives in 2027 needs to know what that tax bill will be before choosing a gift size. The Retirement Tax & Withdrawal Planner includes the senior deduction and an account withdrawal order, plus four calculators including the Roth bracket fill, to plan the year’s withdrawals and tax.
This article was produced with AI assistance and edited for accuracy against the sources linked above.
