Written by Laura L. Fontenot, CPA
President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which has led to tax breaks and incentives for businesses and individuals. The bill contains many provisions to benefit taxpayers with reduced federal taxes, extra deductions, and tax credit opportunities. This article will provide an overview of Section 70411 of the One Big Beautiful Bill Act, which implements a tax credit for donations to scholarship organizations.
Section 70411 incentivizes support for K–12 education by providing U.S. citizens with a nonrefundable federal tax credit of up to $1,700 for contributions to Scholarship Granting Organizations (SGOs). SGOs are nonprofit organizations that use their funds to provide financial assistance for K-12 students. Taxpayers who contribute will be allowed to claim their credit beginning January 1, 2027. The credit is nonrefundable, which means it can reduce a taxpayer’s tax liability to zero, but the taxpayer cannot be refunded the remaining amount. Any remaining credit can be carried forward for up to five succeeding tax years.
There are many compliance requirements for SGOs. A few are listed below.
- Ninety percent of the funds they receive must be spent on scholarships for eligible students
- Scholarship money should only be used for expenses directly related to elementary or secondary education
- A minimum of 10 scholarships should be provided by the SGO
- The scholarship recipients cannot all attend the same school
- The organization must ensure the student is eligible, which is based on household income and family size
If you are interested in donating to a Scholarship Granting Organizations in 2027, please check with the state’s list of qualifying SGOs to ensure the organization meets the IRS requirements for the tax credit. Each state should provide more guidance and updated lists at the end of 2026 and beginning of 2027. If you choose to contribute to an SGO, keep any documentation you receive after making your donation and provide a copy to your CPA. Please keep in mind that your contribution will not result in a double tax benefit. If you receive the credit, you will not be able to include your contribution on Schedule A as well.
We encourage our clients to stay informed about tax law changes as it leads to opportunities for strategic tax planning and ensures tax compliance. Thank you for trusting Darnall, Sikes & Frederick CPAs to handle your tax needs. If you have any questions or need additional information, we are happy to help.
References:
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions