Starting January 1, 2027, about three in four American taxpayers will be able to decide where up to $1,700 of their federal income tax goes. They can redirect it, dollar for dollar, from the U.S. Treasury to a nonprofit that funds K–12 scholarships.
It's called the Education Freedom Tax Credit, created by the One Big Beautiful Bill Act. Whatever side of the political aisle you fall on, it is now law, and almost no one has heard of it.
A credit, not a deduction
Most charitable gifts lower your taxable income. This one lowers your tax bill directly - here’s an example:
Federal tax owed before the gift - $5,000
Redirect to SGO - $1,700
Federal tax owed after SRO contribition - $3,300
Under the proposed rules, each spouse can claim up to $1,700, so a married couple filing jointly can redirect up to $3,400.
Who can use it
You can claim the credit if you owe federal income tax. The full $1,700 requires at least that much in tax liability, and any unused credit carries forward for up to five years.
States must opt in for scholarships to be awarded to their students, and about 31 have so far, including Georgia. But you can give to a qualifying scholarship organization in any participating state, no matter where you live.
On the receiving end, eligibility is broad: students from households earning up to 300% of their area's median income qualify, which covers roughly nine in ten K–12 children. Scholarships can help students attend private school tuition or be used for tutoring and other services for public school students.
How to give
Directly. Choose a scholarship granting organization (SGO) from the IRS list for a participating state, give in 2027, and claim the credit when you file in 2028.
Through payroll. If your employer offers it, a set amount comes out of each paycheck. $1,700 works out to about $65 every two weeks. Paired with lower tax withholding, your take-home pay barely changes.
"It's a no-brainer," says John Alford, chief operating officer of Future School Fund. "Think about the schools and organizations you want to support."
What to watch
The program is new, and the rules are still proposed. Supporters see new money for tutoring and student support across every type of school. Critics, including researchers at the Brookings Institution, worry it will benefit wealthier families most and strain public school budgets. Rollout will be fast, and the details will keep evolving.
Two things to remember now: gifts made in 2026 don't count, and the IRS list of eligible SGOs is expected in early 2027.
Read the full white paper
For the details, including expert interviews, the challenges ahead and a step-by-step checklist, download the full white paper:
This material is for general educational purposes only and is not individualized investment, tax or legal advice. Everyone's situation is different; consult a qualified tax professional before making a contribution or changing your withholding. Investors Asset Management of Georgia, Inc. is a registered investment adviser.
