What the NEW Federal Scholarship Tax Credit Could Mean for Catholic Education Arizona

Beginning January 1, 2027, the Federal Scholarship Tax Credit (FSTC) will allow individual taxpayers to receive a dollar-for-dollar tax credit against their federal tax liability when they contribute to a School Tuition Organization (STO) or Scholarship Granting Organization (SGO) located in eligible states.  

What We Know 

The credit takes effect for contributions made on or after Jan. 1, 2027. The maximum credit allowed is $1,700, with further proposed regulations expected from the U.S. Treasury in late September. Similar to the Arizona tax credits, any unused credit may be carried forward up to five years.    

U.S. taxpayers in any state can contribute to an approved STO/SGO and claim the Federal tax credit. Your state’s opt-in status does not affect your ability to claim the credit.  

The STO/SGO needs to be located in a state that has opted into the program, since participating states are the ones that submit their list of approved STO/SGOs to the U.S. Treasury each year. Currently, 30 states have formally opted in. 

What This Means for Supporters of Catholic Education Arizona 

As of today, Arizona has not opted into the federal tax credit. Governor Katie Hobbs has expressed the desire to wait for proposed regulations to be released before committing. If the Governor does opt in, this would open new possibilities for our supporters to contribute their federal AND state tax liability to support quality education.  

Who is Eligible for Scholarship Funding 

K-12 students whose household income does not exceed 300% of the Area Median Income for their location. The scholarships may be applied to tuition, fees, and other qualifying educational expenses at K-12 schools that are partnered with the STO and located in states that have opted into the federal program.  

As additional information is released, we will keep you updated. For more information, call (602) 218-6542.