Federal Scholarship Tax Credit
FAQ’s
Important Notice: The Federal Scholarship Tax Credit (FSTC) was enacted by Congress and will become effective beginning with the 2027 tax year. Treasury and IRS guidance is pending, and this information may change.
For Donors
What is the FSTC?
A federal tax credit that allows eligible taxpayers to receive a dollar-for-dollar federal income tax credit for contributions to qualified Scholarship Granting Organizations (SGOs), such as BLOCS, in participating states.
How much is the credit?
Up to $1,700 for individuals. Subject to future IRS guidance, the amount may be $3,400 for married couples filing jointly.
How does it work?
You make a FSTC donation to BLOCS.
Designate the school or schools to receive the donation.
Receive a federal tax credit for the donation (up to $1700, possibly $3400 for married couples).
BLOCS partners with schools to award scholarships to eligible students at the school(s) designated by the donor.
Who is eligible?
Every taxpayer in the US, although you should be careful if you donate more than your federal tax liability.
Do I have to live in Pennsylvania?
No. Donors may reside in any state. The SGO must be located in a participating state.
Do I have to donate to a school in Pennsylvania?
Donors can donate wherever they choose, as long as that school is in a state that has opted in to the FSTC program. Pennsylvania has not yet opted in.
Can I support a specific school?
Yes, BLOCS anticipates allowing school designations. You can support public, private, or religious K-12 schools. Donations cannot be designated for an individual student.
What is a tax credit donation?
A tax credit is a dollar for dollar reductions in the amount of tax you owe. If you donate $1000 through the FSTC program, you owe $1000 less in federal taxes
When can I donate?
The FSTC program begins with the 2027 tax year.
How will I be reimbursed? And when?
When you file your annual federal tax return, you claim the tax credit. The tax credit will either reduce the amount of tax you owe, or it will result in a refund check. If a refund is due, the timing depends on when you file your taxes. Please consult your tax professional for details about your personal tax circumstances.
For Schools
Which Schools Can Participate?
Virtually any K-12 school – public or private - provided the state has opted into the program.
Can a school become its own SGO?
One of the requirements of the FSTC law is that students receiving scholarships attend different schools. It is possible but many schools will find it impractical because of federal compliance, funding, and audit requirements.
How can BLOCS help?
BLOCS partners with schools to provide donor processing, compliance, technology, marketing support, and donor stewardship.
Can out-of-state alumni participate?
Yes. Donors may live anywhere in the U.S.
When should schools prepare?
Preparation should begin now. Get in touch with BLOCS to talk about steps you can take now to be ready for the FSTC program in 2027.
How can schools use the donation?
Congress has authorized:
(1) tuition, fees, books, supplies, other equipment, academic tutoring, and special needs services for special needs beneficiaries that are incurred by the beneficiary in connection with enrollment or attendance as an elementary or secondary school student at a public, private, or religious school;
(2) room and board, uniforms, transportation, and supplementary items and services (including extended day programs) if these expenses are required or provided by a public, private, or religious school in connection with enrollment or attendance; and
(3) computer technology, equipment, or internet access and related services if used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school.
How do we start a partnership with BLOCS?
Please reach out to your BLOCS Development Manager or contact us here.
Is the Federal program different than EITC/OSTC?
In many ways. On is that there is a cap of $1700 on the Federal program, where EITC has no cap. FSTC donations may be smaller on average, but there are many, many more potential donors who can take advantage of the FSTC program compared to EITC/OSTC. Also, it is a federal program, whereas the EITC/OSTC is specific to Pennsylvania and state taxes. Please reach out to BLOCS to learn more, and consider attending one of our BLOCS University sessions.
How can this impact my school?
Consider the number of people connected to your school: parents, alumni, community members, teachers, staff, and more. For many schools, that is hundreds or thousands of people, and the potential donations could be in hundreds of thousands to millions of dollars annually.
How are scholarship recipients selected?
Schools can select the scholarship recipients using their normal process, provided they also comply with the rules of the FSTC program: student families must be at or below 300% of the area median income, and preference must be given to siblings of previous FSTC scholarship recipients.
For Students & Families
Who is eligible for scholarships?
Students whose household income is at or below 300% of Area Median Income, subject to federal rules.
How do families apply?
BLOCS partners with schools across Pennsylvania to make funds available through the schools. Please contact the school or schools you wish to attend.
Can scholarships be used only at private schools?
No. FSTC scholarships are available to be used at public, private and religious K-12 schools.
How will BLOCS verify eligibility?
BLOCS partners with schools across Pennsylvania, and those schools work with families to verify eligibility. Please be sure to contact the school or schools you wish to attend.
What is the dollar amount of each scholarship?
There are no limits in the FSTC program on the size of the scholarship. BLOCS partners with schools across Pennsylvania, and those schools work with families to determine scholarship amounts. They often have additional funding sources beyond FSTC scholarships. Please be sure to contact the school or schools you wish to attend.
General Questions
Has Pennsylvania opted in?
Not yet. Pennsylvania must affirmatively opt into the program.
Why is BLOCS starting now?
To be sure we are ready on Jan 1, 2027 to support students, families and our partner schools, BLOCS is building technology, compliance systems, donor awareness, and marketing programs before the program begins.
Where can I learn more?
Contact BLOCS and sign up for our newsletter (or Get Updates – same as above).
*Disclaimer that the page is informational and not legal or tax advice