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STANDARDS TRACKER |
STANDARDS TRACKER
IRS proposed regulations: Section 25F education freedom tax credit
Proposed rules for the new Section 25F K-12 scholarship credit set the eligibility, SGO certification, and reporting framework, per the Journal of Accountancy.
Treasury and the IRS released proposed regulations on Oct. 1, 2026, to implement the Section 25F education freedom tax credit, the Journal of Accountancy reports. The new federal credit applies to contributions to organizations that provide scholarships to eligible elementary and secondary schools. Companion temporary regulations took effect immediately to give states and SGOs a head start on the administrative framework.
BY THE NUMBERS
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See below EFFECTIVE |
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Oct 2 LAST UPDATED |
IRS ISSUER |
The Journal of Accountancy reports the proposed rules cover student eligibility, SGO operations, state participation and certification procedures, reporting requirements, and credit administration. The credit is available only in states that voluntarily elect to participate; coverage will vary by state. Details on credit amounts, carryforward rules, and refundability are not stated in the listed sources.
For close teams in organizations that operate or fund SGOs, the companion temporary regulations set out the framework for state elections, SGO certification, and reporting of qualified contributions, per the Journal of Accountancy. SGOs and states will need to satisfy statutory requirements before contributions can qualify. Whether contributions made through pass-through entities qualify is not stated in the listed sources.
The proposed regulations are open for comment, per the Journal of Accountancy. Several items remain open: the rules are not yet final, and state election status will determine program availability in any given jurisdiction. Close and tax teams at organizations considering SGO contributions or sponsorships should monitor final regulations following the comment process.
The credit was enacted as part of new federal legislation, per the Journal of Accountancy. Specific effective dates, dollar limits, comment deadlines, and hearing dates are not stated in the listed sources; teams should consult the Federal Register notice directly for those details.
WHAT TO DO IN THE CLOSE
| Confirm whether your organization's state has elected or plans to elect Section 25F participation. | |
| Determine whether any planned SGO contributions will be made directly by individuals or through entities. | |
| Identify employees or executives who may claim the credit and assess what contribution data your tax reporting processes will need. | |
| For organizations operating or funding SGOs, review the companion temporary regulations' certification and donor acknowledgement requirements. | |
| Monitor the comment period and final regulations before committing to SGO contribution strategies. |
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QUESTIONS THIS ANSWERS
What is the Section 25F education freedom tax credit?
It is a new federal tax credit for contributions to organizations that provide scholarships to eligible elementary and secondary schools, per the Journal of Accountancy. Credit amounts and other details are not stated in the listed sources.
Which states offer the Section 25F credit?
The credit is available only in states that voluntarily elect to participate, per the Journal of Accountancy. Which states have elected is not stated in the listed sources.
When do the proposed Section 25F regulations take effect?
Companion temporary regulations took effect immediately on issuance, per the Journal of Accountancy. The program launch date and comment deadline are not stated in the listed sources.
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Previously: GASB Implementation Guide 2026-1: subsidies under Statement 103 financial reporting model
A living page: it is re-read and updated as coverage arrives; last updated Friday October 2. Facts come from the linked sources; confirm against the issuer's own text before relying on it.
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