Treasury, IRS propose regulations for education tax credit

Treasury and the IRS issued proposed regulations last week to implement the education freedom tax credit, a new federal tax credit under Sec. 25F for contributions to organizations that provide scholarships to eligible elementary and secondary schools.

Beginning in 2027, individual taxpayers generally may claim a nonrefundable credit of up to $1,700 for qualified cash contributions to eligible organizations. Married couples filing jointly may claim a combined credit of up to $3,400. Unused credits may be carried forward for up to five years.

The proposed regulations provide rules on student eligibility, scholarship-granting organization operations, state participation, reporting requirements and credit administration. The regulations also include an ordering rule intended to preserve the maximum available federal credit for taxpayers who qualify for state tax credits and the new federal credit. Read more.