Gov. Reynolds announces next step in Iowa’s participation in the new federal Education Freedom Tax Credit program, launches state scholarship granting organization application

Today, Governor Kim Reynolds announced the launch of the Iowa Scholarship Granting Organization application, inviting nonprofit organizations to apply to serve as scholarship granting organizations in Iowa for the new federal Education Freedom Tax Credit program. The new program, set to begin in 2027, is the first federal tax credit supporting private contributions for K-12 scholarships.

“Iowa believes in empowering every student and family with world-class educational options so they can choose the best place and path for their future,” Governor Reynolds said. “The Education Freedom Federal Tax Credit complements existing statewide programs and will further expand access with taxpayer contributions that benefit K-12 students and families here in Iowa. Today’s launch of the Iowa Scholarship Granting Organization application is the next step toward making this no-cost investment in Iowa students a reality.”

Outlined in the One Big Beautiful Bill Act signed on July 4, 2025, the Education Freedom Tax Credit program offers federal tax credits to taxpayers who make qualifying cash contributions to approved Scholarship Granting Organizations (SGOs) in participating states. Unlike a traditional federal education program funded through direct government appropriations, the scholarships are financed through private donations incentivized by federal tax credits. Individual taxpayers will be able to claim a dollar-for-dollar nonrefundable federal income tax credit of up to $1,700 annually for qualified contributions, allowing donors to support students at no cost to themselves. Married couples filing jointly can claim a combined credit of up to $3,400. Iowa SGOs will use these contributions for scholarships to eligible K-12 students across Iowa.

Students eligible to receive scholarships through the federal tax credit program must have a family income below 300% of their area median income (AMI). If 20% of all Iowa taxpayers participate, an estimated $528.1 million in scholarships would be generated each year, which could support around 519,553 eligible K-12 students attending public schools, public charter schools and nonpublic schools across the state.

Scholarship Granting Organizations (SGOs) are eligible 501(c)(3) nonprofit organizations that accept qualified contributions from taxpayers to fund scholarships to eligible students for qualifying education-related expenses. Interested nonprofit organizations must complete the Iowa Scholarship Granting Organization application, accessible on the Iowa Department of Revenue’s website, by 11:59 p.m. on Dec. 11, 2026, to participate as an SGO in Iowa in 2027.

The first contributions eligible for the new federal Education Freedom Tax Credit can be made after the state has submitted its official list of eligible SGOs to the Internal Revenue Service (IRS) in early 2027. Once submitted, Iowa's finalized list of approved SGOs will be available on the Iowa Department of Revenue’s webpage.

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