How Schools, Dioceses, and SGOs Can Prepare for the Federal Scholarship Tax Credit Program

The Federal Scholarship Tax Credit (FSTC) program, passed as part of the One Big Beautiful Bill, creates a new opportunity for families and donors to support K–12 education. The program allows individual taxpayers to receive a federal income tax credit for contributions to approved Scholarship Granting Organizations (SGOs), which then award scholarships for qualified educational expenses, such as tuition, tutoring, and technology.

While the Treasury Department will issue final regulations over the next year, schools and dioceses can take meaningful steps now to prepare. Planning ensures Catholic and faith-based communities are ready to support families and donors as this new opportunity takes shape.

The Federal Scholarship Tax Credit allows individuals (not corporations) to contribute to approved SGOs and claim a dollar-for-dollar credit on their federal income taxes. The contributions fund K–12 scholarships for families whose income is within 300% of Area Median Income (AMI)—a level that includes many middle-income households.

Take these steps to understand better how FSTC will impact your school:

• Designate a point person to track updates and communicate program basics to school leaders.
• Connect with your state Catholic conference or CAPE affiliate for coordinated guidance.
• Begin compiling a list of SGOs operating in your area.

The Federal Scholarship Tax Credit caps contributions at $1,700 per taxpayer each year, or potentially $3,400 for joint filers (pending Treasury guidance). The cap is designed to keep the program broad and sustainable, and it can be stacked with state tax credit programs if managed correctly.

Take these steps to build clarity and confidence around FSTC giving:

• Educate donors about the difference between federal and state credits, including the “no double-dipping” rule.
• Coordinate with diocesan communications teams to ensure consistent language across parishes and schools.
• Start building a donor education toolkit that includes key messages and sample outreach templates.

Each state must formally opt in to the Federal Scholarship Tax Credit program before families and donors can benefit. The state will then certify SGOs to receive contributions and distribute scholarships.

Take these steps to get a full picture of your state’s FSTC participation:

• Monitor your governor’s and legislature’s positions on participation.
• Stay connected to associations that engage in state-level discussions about the opt-in process.
• Be ready to share updates with donors and families as your state’s decisions progress.

Strong relationships between schools, dioceses, and SGOs will make implementation smoother once the Federal Scholarship Tax Credit program begins. SGOs will manage compliance and donor reporting, while schools will help families understand eligibility and apply for scholarships.

Take these steps to communicate with SGOs about FSTC:

• Reach out to SGOs in your state to establish or renew partnerships.
• Ensure your systems can securely share enrollment or eligibility information if needed.
• Begin developing communication materials that explain how the FSTC complements existing state programs.

Donor education will be critical to prepare for the Federal Scholarship Tax Credit program. Many donors will want to understand how this new federal credit interacts with their state’s tax credit program and how their contribution directly helps students.

Take these steps to prepare donors for FSTC:

• Coordinate messaging with diocesan development or stewardship offices.
• Prepare simple materials that outline how donations flow from the donor to the SGO and ultimately to scholarships for students.
• Encourage donors to consult their tax advisors once Treasury releases final rules.

Schools that plan ahead will find it easier to manage family communication and recordkeeping once Federal Scholarship Tax Credit scholarships begin to flow.

Take these steps to prepare your staff for changes related to FSTC:

• Confirm that your financial aid or tuition management systems can track scholarship awards accurately.
• Train your admissions and business office teams on how federal scholarships will integrate with existing tuition or aid processes.
• Establish a clear internal point of contact for scholarship-related questions.

Families will look to schools for clear information once the Federal Scholarship Tax Credit becomes available. Helping them understand who qualifies, how to apply, and what documentation they may need will build trust and confidence from the start.

Take these steps to prepare FSTC information for families:

• Begin creating simple family FAQs that explain the purpose of the FSTC and how it may help with tuition.
• Plan to host short informational sessions once more details are available.
• Reassure families that participation will be voluntary and that schools and SGOs will guide them through the process step by step.
• Coordinate with SGOs to ensure consistent messaging on eligibility and timing.

Treasury and state agencies will release more details about the Federal Scholarship Tax Credit program in 2026, including SGO certification and reporting procedures. Staying informed, and participating in conversations where possible, will help schools and dioceses anticipate what’s next.

Take these steps to stay informed about FSTC updates:

• Subscribe to Treasury and FACTS updates for ongoing rulemaking information.
• Attend webinars or training sessions hosted by FACTS and partner organizations.
• Share key takeaways with leadership teams and boards.

The Federal Scholarship Tax Credit represents one of the most significant opportunities in decades to expand access to private and faith-based education. By understanding the basics, building partnerships, preparing families, and setting up systems now, schools and dioceses can ensure they’re ready to lead when the program launches

Want more insights on what the Federal Scholarship Tax Credit means for schools, dioceses, and SGOs?

Join FACTS experts and partners for a live webinar, Federal Scholarship Tax Credit: From Legislation to Implementation, to hear the latest Treasury updates and learn how to prepare your community.