How it works
How the Federal Scholarship Tax Credit works
The Federal Scholarship Tax Credit (FSTC), also known as the Education Freedom Tax Credit under IRC Section 25F, begins with the 2027 tax year.
A credit, not a deduction
A deduction lowers the income you are taxed on. A credit lowers your tax bill itself, dollar for dollar. That is why a gift through MSEC reduces your federal income tax by the same amount.
Starting in January 2027, married couples filing jointly can redirect up to $3,400 of their federal income tax, and single filers up to $1,700, to scholarships for Mississippi students.
Where a gift goes, step by step
You give through MSEC
You make a gift to MSEC and receive a written acknowledgment for your tax return. Your tax preparer uses it to claim the credit.
MSEC directs your gift to scholarships
By law, at least 90% of what MSEC receives must go to scholarships.
Families apply
Parents of K-12 students apply to MSEC. Students in households earning up to 300% of area median income are eligible, and the law gives priority to returning scholarship students and their siblings.
MSEC verifies and pays the school
MSEC reviews each application, confirms eligibility, and sets award amounts. MSEC pays the scholarship directly to the student's school.
An example
Suppose your federal income tax for 2027 is $5,000 and you give $1,700 through MSEC during the year. When you file, your tax bill drops to $3,300. Your total is the same $5,000, and $1,700 of it supports scholarships for Mississippi students.
This example is for illustration only. The credit is up to $3,400 for married couples filing jointly and up to $1,700 for single filers. Please consult your tax advisor about how the credit applies to your situation.
Good to know
Timing. A gift made in 2027 is claimed on your 2027 return, filed in early 2028. Gifts made in 2026 do not qualify. You give first and recover the amount when you file. Some taxpayers adjust their withholding to even that out, and your preparer can advise.
The credit is non-refundable. It reduces your federal income tax, but not below zero. If you owe less than your gift, ask your preparer how any unused credit carries forward.
No double benefit. You cannot claim the same dollars as both this credit and a charitable deduction or a state tax credit.
Who can take part. Any taxpayer with federal income tax liability, including grandparents and adult children.
Frequently asked questions
A few more answers
What is an SGO?
SGO stands for scholarship granting organization. An SGO is a 501(c)(3) that receives gifts and pays scholarships for eligible students under the Federal Scholarship Tax Credit. MSEC is a Mississippi SGO. Federal rules require an SGO to provide scholarships to at least 10 students who do not all attend one school, so MSEC serves three participating schools.
Who qualifies for a scholarship?
K-12 students in households earning up to 300% of their area's median income. Priority goes first to returning scholarship students, then to their siblings. Applications are not open yet.
Which schools does MSEC serve?
Madison-Ridgeland Academy, Magnolia Speech School, and Delta Streets Academy. Each is a participating school of the Mississippi Education Collective.
Is MSEC a registered nonprofit?
Yes. MSEC is a 501(c)(3) scholarship granting organization with Charity ID 41-4658534. Our street address is 300 Concourse Blvd., Suite 200, Ridgeland, MS 39157.
Does MSEC give tax advice?
No. The information on this site is general information. Please talk with your CPA or tax advisor about how the credit applies to your situation.
Giving opens January 2027
Sign up to be notified
Share your email address and we will notify you when giving opens. Please wait until then, because gifts made in 2026 do not qualify for the credit.