COLUMBIA, S.C. — A new federal program will let South Carolina nonprofits begin handing out scholarships for private school tuition and other K-12 costs in January, funded by taxpayers who get a dollar-for-dollar federal tax credit for giving.
The program, formally the Federal Scholarship Tax Credit under section 25F of the tax code and often called the Education Freedom Tax Credit, was created by the One Big Beautiful Bill Act, and South Carolina is one of 30 states that have signed on so far. Gov. Henry McMaster chose to opt in on Jan. 13, and last week he signed Executive Order 2026-23 directing the state Department of Revenue to take applications from scholarship granting organizations that want to take part in tax year 2027. Groups apply by email to the department.
Here is how the money moves. Starting Jan. 1, an individual can give an approved nonprofit as much as $1,700 a year and claim a matching credit on their federal return. For joint filers, the ceiling doubles to $3,400. Nonprofits face no cap on what they raise or award, as long as they do not spend more than they take in, and they decide how much each student receives.
Eligible expenses are broad, from tuition and tutoring to books, computers, internet service, transportation and uniforms. The federal awards can also be stacked on top of the state’s own voucher and tax-credit scholarships.
The only limit on students is family income, which cannot exceed three times the local median. That works out to $277,200 in Richland County, $319,200 in Greenville County and $352,500 in Charleston County. The Urban Institute has estimated that up to 90% of children nationwide could qualify.
Federal law sets the guardrails, and states cannot add rules of their own. Each nonprofit must fund more than 10 students at more than one school, may keep no more than 10% of donations, and faces yearly third-party audits. The Treasury Department and the IRS have issued proposed regulations, along with temporary rules telling states and scholarship groups how to prepare for the Jan. 1, 2027, launch. The proposal still needs final approval, and public comments are open until Dec. 1.
Participation is decided one year at a time, so South Carolina’s next governor will choose whether the state stays in.
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