Iowa Opens Applications for New Federal Education Tax Credit Program

Gov. Kim Reynolds announced Friday that Iowa is now accepting applications from nonprofit organizations interested in becoming Scholarship Granting Organizations, also known as SGOs. These organizations would collect qualifying donations and use the money to provide scholarships for eligible K-12 students, providing millions of dollars in scholarships for students across the state.

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The Education Freedom Tax Credit program is scheduled to begin in 2027, and was established through the One Big Beautiful Bill Act. Under the program, taxpayers can receive a federal income tax credit for donating money to approved scholarship organizations in participating states. Individual taxpayers can receive a dollar-for-dollar tax credit of up to $1,700 per year, while married couples filing jointly can claim up to $3,400.

“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. 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.”

-Iowa Governor Kim Reynolds 

Unlike traditional government-funded education programs, the scholarships will be supported through private donations. The federal tax credit is designed to offset qualifying donations by reducing the amount of federal income tax a donor owes. Iowa scholarship organizations would use those contributions to provide financial assistance to eligible K-12 students across the state.

Students who receive scholarships must come from families with incomes below 300% of their area's median income. The scholarships can support eligible students attending public schools, public charter schools and private schools across Iowa. According to estimates included in the announcement, if 20% of Iowa taxpayers participate, the program could generate approximately $528.1 million in scholarships each year. That money could potentially support around 519,553 eligible K-12 students statewide.

The state is now looking for eligible nonprofit organizations to serve as scholarship granting organizations. Those organizations must qualify as 501(c)(3) nonprofits and meet the program's requirements. Nonprofits interested in participating must complete Iowa's Scholarship Granting Organization application by 11:59 PM on December 11th, 2026. The application is available through the Iowa Department of Revenue's website.

Once applications are reviewed, Iowa plans to submit its official list of eligible scholarship organizations to the Internal Revenue Service in early 2027. The state's finalized list of approved organizations will then be made available through the Iowa Department of Revenue. The first donations eligible for the federal tax credit can be made after Iowa submits that official list to the IRS.