Federal Scholarship Tax Credit Program
The federal scholarship tax credit program provides up to a $1,700 nonrefundable federal tax credit to individuals who donate to qualifying scholarship granting organizations (SGOs). SGOs then award scholarships to eligible students for qualifying educational expenses.
Any taxpayer in the country may contribute to a South Dakota SGO to benefit South Dakota students - both public and private school students - and receive the federal tax credit. Reach out to an eligible SGO today.
South Dakota also intends to support all students in the state - including those attending public schools, private, tribal and BIE, and even those educated through homeschool, microschool, and other nontraditional schooling approaches. This approach allows families to choose the type of instruction that works best for their kids. Stay tuned for more information.
Scholarship Granting Organizations must apply for inclusion on South Dakota's list prior to December 15 annually. Please note that we may reach out for additional information as program requirements are solidified.
SGOs must be a 501(c)(3) nonprofit organization and may not be a private foundation. SGOs must meet the requirements set out in law and regulation, including:
- Spend 90 percent or more of its income on scholarships to eligible students (or, under certain circumstances, 85 percent)
- Provide scholarships to at least 10 students who do not all attend the same school
- Provide scholarships for only qualified educational expenses
- Provide scholarships to eligible students with a priority for students having been awarded scholarships the previous year and students whose sibling was previously awarded
- Not earmark a scholarship for any particular student
- Verify the annual household income and family size of eligible students who apply and limit scholarships to only those meeting the law's requirements
- Prohibit "disqualified persons" from receiving scholarships
To maintain eligibility on South Dakota's list, SGOs will be required to submit certain information demonstrating compliance with laws and regulations. More information will be available soon.
Contributions of up to $1,700 ($3,400 for married couples) must be made to a qualifying scholarship granting organization (SGO). You do not need to contribute to an SGO in your state of residence to earn the tax credit; you simply need to donate to an SGO that is part of a state's list as submitted to the Internal Revenue Service for the applicable tax year. A list of eligible South Dakota SGOs will be available in early 2027.
Students eligible to benefit from the program must be resident in South Dakota and attend school. To find out if your student's school is covered by an SGO, please reach out to your child's school. A list of eligible organizations in South Dakota will be available in early 2027.
The federal scholarship tax credit law and temporary rules allow schools and districts to establish a 501(c)(3) organization to target students attending their schools. An SGO must support more than one attendance center and award scholarships to at least 10 students.
For more information on how to support your students, see the resources links below or reach out to FSTC@state.sd.us.
Internal Revenue Service FSTC Page
The U.S. Department of Treasury's temporary regulations and proposed rules
Congress.gov FSTC Summary and Bill Language