For CPAs, EAs, and Financial Advisors

Help Clients Understand the EFTC

PSC publishes educational explanations of Section 25F mechanics, documentation practices, and client-conversation resources to help tax and financial professionals answer common client questions. This content is educational only and is not tax advice.

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PSC does not provide individual tax advice. Taxpayers should consult a qualified tax professional concerning their circumstances.

The Education Freedom Tax Credit creates the opportunity. Scholarship Granting Organizations administer the scholarships. PSC provides the infrastructure that helps those organizations operate.

Program Mechanics

What Professionals Commonly Need to Explain

Credit vs. deduction

A credit reduces eligible federal income-tax liability dollar-for-dollar, subject to limitations. A deduction reduces income subject to tax. Section 25F provides a credit.

Annual limitation

The credit is limited to the applicable annual maximum, currently understood to be up to $1,700 per eligible taxpayer, and is further limited by the taxpayer's federal tax liability.

Carryforward

Unused credit may be eligible to carry forward for up to 5 succeeding tax years, subject to applicable rules and limitations.

Documentation

What Clients Should Retain

Contribution records furnished by the participating SGO
Confirmation the SGO appeared on a participating state's SGO list for the applicable year
Records of any related state tax credit claimed for the same contribution
Any additional documentation required under final Treasury and IRS guidance

State Credit Interaction

How State Credits May Affect the Federal Credit

Any state tax credit for the same contribution may reduce or otherwise affect the federal credit. Treatment depends on applicable law and guidance.

Important Disclosure

Educational Content Only

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