10/02/2026
Happy Friday, folks - temporary and proposed regulations are out for the Education Freedom Tax Credit!
We should ALL be stoked about the operational rules and guidelines in this package - they provide a strong structure for fraud prevention and good management. Here's a quick summary:
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The proposed regulations state that married couples filing jointly won't be limited to a $1,700 credit. They'll be able to claim up to $3,400 when each spouse puts up to $1,700 toward K-12 education.
Digital wallets are explicitly mentioned and allowed in the proposed regulations. A huge win for streamlined convenience (if the right digital wallet is in place)!
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A lot of states have been waiting to see what responsibilities will fall to the federal government and which will fall to them. Now we know, and here's the list -
States will be responsible for certifying SGOs, reviewing their annual financial and programmatic audits, reviewing required compliance information, investigating reporting failures, maintaining their SGO lists, and removing organizations that no longer qualify.
They'll also use a federal IRS portal to submit their election, SGO list, annual certifications, and any changes to that list.
And for 2027, states that make their advance election by January 1 will have until February 15 to submit their SGO list.
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Lots more guidance for new and existing SGOs. For those interested in more information on the SGO side, I've got you! Check the comments for links.
SGOs will register through a federal IRS SGO portal and use a uniform unique donor-number system. They'll need to maintain segregated 25F accounts and records, provide donor acknowledgments by January 31, and report qualified contribution information to the IRS by February 28.
(The donor acknowledgments will let taxpayers claim the credit, and the information reported to the IRS will allow the IRS to verify).
There's also some discussion of breathing room for new SGOs. States may rely on bylaws, written policies, procedures, and other documentation while a new organization is still building its operating history, and organizations with pending 501(c)(3) applications can be included under certain conditions.
So, in other words, SGOs that want to participate in the credit but don't have a long operating history may be evaluated based on their setup, operational procedures, and bylaws. This gives new SGOs more room to get established and participate from the start.
"Located in a state" doesn't mean an SGO has to be physically headquartered there - it means the organization is authorized to do business in the state and complies with applicable state charity laws.
More to come!
