Scholarship Granting Organizations

A Scholarship Granting Organization (SGO) is a 501(c)(3) nonprofit organization that accepts tax-deductible donations and uses those funds to award scholarships to eligible K-12 students. SGOs are sometimes called School Tuition Organizations (STOs) in Arizona, Scholarship Funding Organizations (SFOs) in Florida, or Student Scholarship Organizations (SSOs) in Georgia, depending on the state. These organizations serve as intermediaries between donors who want to support educational choice and families seeking financial assistance for private school tuition and other qualified educational expenses.

Starting January 1, 2027, individual taxpayers can claim a nonrefundable federal tax credit of up to $1,700 per year for cash contributions made to qualifying SGOs under Section 25F of the Internal Revenue Code. This is a dollar-for-dollar credit, meaning it directly reduces the amount of federal income tax you owe rather than simply lowering your taxable income like a deduction. For example, if you owe $10,000 in federal taxes and donate $1,700 to an eligible SGO, your tax bill drops to $8,300. There is no overall cap on the total amount of credits available nationwide, so the credits will not run out.

A tax credit reduces your tax bill dollar-for-dollar, while a tax deduction only reduces your taxable income. For example, a $1,700 tax credit saves you exactly $1,700 in taxes. A $1,700 tax deduction, on the other hand, would only save you $1,700 multiplied by your marginal tax rate — so if you are in the 22% bracket, a deduction would only save you $374. This makes the SGO tax credit significantly more valuable than a standard charitable deduction, effectively allowing donors to redirect money they would have paid in taxes toward student scholarships instead.

Yes. Under the One Big Beautiful Bill Act (P.L. 119-21), each state must voluntarily elect to participate and submit an annual list of approved SGOs to the IRS. The election must be made by the Governor or a designated state authority. States that do not submit their SGO list by the deadline will not have any qualifying SGOs for that calendar year. As of early 2026, Virginia is the only state to have formally opted in, and Nebraska's governor has signed an executive order indicating intent to participate. Several other states are expected to opt in before the 2027 launch.

Under the federal program, students must be eligible to enroll in a public elementary or secondary school and come from a household with income no more than 300% of the area median income. The Urban Institute estimates that approximately 90% of U.S. households would meet this income requirement. SGOs must prioritize awarding scholarships to students who received one the previous year, followed by students with siblings who received scholarships from the same organization. Individual state programs may have additional eligibility criteria.

SGO scholarship funds can be used for a wide range of qualified elementary and secondary education expenses, following the same definition used for Coverdell Education Savings Accounts. This includes private school tuition and fees, textbooks, supplies, academic tutoring, computer equipment and software, room and board, uniforms, extended day programs, and supplementary items and services required for enrollment or attendance. The funds can be used at both private and religious schools, and some state programs also allow use for homeschool expenses.

No, you cannot claim both credits for the same donation. Section 25F(b)(2) requires that the federal tax credit be reduced by any state tax credit claimed for the same contribution. However, you can make separate donations — one to claim a state tax credit and a second to claim the federal tax credit. For example, you could donate to an SGO under your state's tax credit program and claim the state credit, then make a separate $1,700 donation to the same or a different SGO and claim the federal credit on that second contribution.

Under the federal program, each individual taxpayer can claim a credit of up to $1,700 per year, regardless of filing status. There is no minimum donation required. State tax credit programs have their own limits that vary widely — for example, Arizona allows individuals to claim up to $2,609 (or $5,218 for married filing jointly) for original STO credits, while other states may have different caps. You can donate more than the credit limit, but the excess would be treated as a regular charitable contribution rather than a dollar-for-dollar credit.

To qualify as an SGO under the federal program, an organization must be a registered 501(c)(3) nonprofit with a primary mission of providing scholarships to eligible K-12 students. The SGO must provide scholarships to at least 10 students who do not all attend the same school, and must spend at least 90% of its revenue on qualifying scholarships (retaining no more than 10% for administrative costs). The organization must be included on its state's certified list of SGOs submitted to the IRS, and it cannot allow donors to earmark contributions for specific students.

Yes, you can donate to an SGO in any participating state and claim the federal tax credit, regardless of where you live. However, the SGO can only use your contribution to fund scholarships for students located within the state that recognized it. For multistate SGOs, donors must designate which participating state's list includes the organization and where their contribution will be used. State tax credit programs typically require donations to SGOs operating within that specific state.

These are all names for essentially the same type of organization — a nonprofit that provides tax credit scholarships to K-12 students. The terminology varies by state: Arizona uses School Tuition Organization (STO), Florida uses Scholarship Funding Organization (SFO), Georgia uses Student Scholarship Organization (SSO), and the federal government and most other states use Scholarship Granting Organization (SGO). Regardless of the name, these organizations all accept donations, provide tax benefits to donors, and award scholarships to eligible students for private school tuition and other educational expenses.

No. Under the One Big Beautiful Bill Act, starting for amounts received after December 31, 2026, scholarships for qualified elementary or secondary education expenses provided by SGOs to eligible students (or their dependents) will not be included in gross income for federal tax purposes. This means families who receive SGO scholarships do not need to report them as taxable income on their federal tax returns, making the full scholarship amount available for educational expenses.

You can browse our directory above and filter by state to find SGOs operating in your area. Each state with a tax credit scholarship program maintains its own list of approved organizations — for example, Arizona's Department of Revenue certifies STOs, Florida's Department of Education approves SFOs, and Georgia's Department of Revenue publishes its SSO list. For the new federal program launching in 2027, the IRS will publish lists of qualifying SGOs by state once states submit their elections and approved organization lists.

Yes. If your federal tax liability is less than the amount of the credit you are eligible to claim, the unused portion can be carried forward for up to five years. For example, if you donate $1,700 to an SGO but only owe $1,000 in federal taxes for that year, the remaining $700 credit can be applied to your tax liability in future years. This carry-forward provision ensures that donors are not penalized for having a lower tax bill in the year they make their contribution.

The federal Education Freedom Tax Credit takes effect on January 1, 2027. Contributions made on or after that date to SGOs on a participating state's certified list will qualify for the credit. Taxpayers will claim the credit when filing their 2027 federal tax returns in early 2028. The U.S. Treasury Department is currently developing regulations and guidance for the program, including instructions for donors on how to claim the credit. States can begin making advance elections to participate starting in 2026 by submitting IRS Form 15714.