27 States Join New Federal Scholarship Tax Credit Program

Summary

On June 8, 2026, the IRS announced that 27 states have elected to participate in the Federal Scholarship Tax Credit (FSTC) program, enacted as part of the One, Big, Beautiful Bill. The program allows eligible taxpayers to claim a federal tax credit for qualified contributions to Scholarship Granting Organizations (SGOs), which provide scholarships for elementary and secondary education expenses. State participation requires a formal election, and the list of participating states is maintained by the IRS.

Sources

• Internal Revenue Service — More than half the U.S. States signed up to participate in the federal scholarship tax credit program enacted under the One, Big, Beautiful Bill — https://www.irs.gov/newsroom/more-than-half-the-us-states-signed-up-to-participate-in-the-federal-scholarship-tax-credit-program-enacted-under-the-one-big-beautiful-bill

Our Take

This new tax credit is relevant for cross-border filers in a few specific ways. US citizens living in Canada who itemize deductions and have US-source income may be eligible to contribute to an SGO operating in a participating state where they have a tax nexus. Canadians with US business or investment interests in one of the 27 participating states might also explore this credit. However, since the credit is federal but requires state-level participation, the interplay with Canadian tax treatment of charitable contributions adds complexity — the credit claimed on the US return may have Canadian tax implications under the US-Canada Tax Treaty. Cross-border filers interested in this credit should consult a CPA who understands both US and Canadian charitable contribution rules before making any contributions.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.