What Is It?
The Federal Scholarship Tax Credit Program is a federal initiative designed to make K–12 education more affordable and accessible for families across the United States.
It does this by encouraging individual taxpayers to contribute to qualified Scholarship Granting Organizations (SGOs), which in turn provide scholarships to eligible students to help cover education-related expenses.
This program is fully funded by the federal government (not the state of Kentucky) and creates new opportunities for families to choose the learning environment that best fits their children’s needs.
How It Works
Program Overview:
The process is simple and transparent.
Fast Facts:
- 100% federally funded
- No state cost or cap on total credits
- No program expiration date
- Applies to all K–12 students, public or private
- Effective for donations made on or after January 1, 2027
Allowable Expenses:
Scholarships through the program can cover a broad range of K–12 educational costs; similar to those permitted under 529 education savings accounts.
Eligible expenses include:
✅ Tuition and school fees
✅ Books and learning materials
✅ Classroom supplies and equipment
✅ Tutoring or special-needs services
✅ Computers, tablets, and technology
✅ Internet access for learning
✅ School uniforms and required attire
✅ Transportation to and from school
Implementation Timeline
The program officially begins with donations made on or after January 1, 2027.
To participate:
- Donors can make contributions once the federal program is active.
- SGOs must apply for and maintain annual approval to operate under the program.
- Students and families will begin applying for scholarships through approved SGOs once funds are available in their area.
State Participation:
Each state must elect annually to participate in the federal program. The election is made by the Governor or another designated state official.
Once elected, SGOs within that state can begin processing donations and awarding scholarships.
Legislative & Compliance Notes
Because this is a federal tax credit program, oversight and participation are governed by federal law, not state education departments.
However, each participating state is required to:
- Maintain a current list of approved SGOs
- Submit that list annually to the U.S. Department of the Treasury
- Ensure SGOs meet the program’s core requirements
SGO Requirements at a Glance:
- Must be a 501(c)(3) nonprofit based in the same state as the students it serves
- Must spend at least 90% of contributions on scholarships
- Must provide scholarships to at least 10 students who do not all attend the same school
- Must verify household income for every applicant
- Must maintain separate accounting for scholarship funds
Transparency, accountability, and accessibility are at the heart of this program — ensuring that every dollar goes directly toward helping Kentucky families.
Want to Explore How You Fit In?
Choose your path to learn how you can participate:
Got questions? We’ve got answers.
Visit our FAQ Page to learn more.