COLUMBIA, S.C. — South Carolinians who give to private K-12 scholarship groups could soon cut their federal tax bill dollar for dollar, and the state is lining up the organizations that would hand out that money.
Draft rules from the IRS and the Treasury Department now spell out how the new Education Freedom Tax Credit will work. It is a federal school choice program that takes effect in 2027. South Carolina is one of 30 states that have signed on. Gov. Henry McMaster chose to participate on Jan. 13, 2026.
Under the proposal, an individual in a participating state may take a credit as large as $1,700 annually for gifts to an approved scholarship granting organization. For joint filers, the ceiling doubles to $3,400. Credits that go unused can roll forward for as long as five years.
The groups would steer the money to K-12 students as scholarships. Besides private school tuition, the money can go toward help like tutoring, computers, classroom materials and services for students with disabilities. A family generally must earn less than 300% of the local median income to qualify, a cap that federal officials estimate still covers roughly 96% of kids in states that joined. Recipients also need to be public-school eligible and reside in the same state as the scholarship group.
To take part, an organization has to be a qualifying public charity, spend at least 90% of donations on scholarships, keep those gifts in separate accounts and award aid to at least 10 students who do not all attend one school. It also must appear on its home state list, which states have to finalize by Feb. 15, 2027. The draft rules bar states from adding stricter limits than federal law allows.
In South Carolina, McMaster signed Executive Order 2026-23 putting the state Department of Revenue in charge of collecting applications from scholarship groups that want to operate here for tax year 2027. Interested organizations can apply by email at [email protected]. The program was created under the One Big Beautiful Bill Act.
The public can comment on the proposed federal rules through the end of November, and a hearing is scheduled for Dec. 15.
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