Frequently Asked Questions
This reference guide provides a comprehensive breakdown of the most frequently asked questions regarding the Section 25F Federal Scholarship Tax Credit (enacted under Public Law 119-21) and the operational framework of American GOAL (administered by GOAL Scholarship Program, Inc.).
General Program overview
What is the Federal Scholarship Tax Credit (IRC Section 25F)?
Answer: The Federal Scholarship Tax Credit, codified under Internal Revenue Code Section 25F by Public Law 119-21 (the One Big Beautiful Bill Act), allows individual taxpayers to claim a 100% dollar-for-dollar nonrefundable federal income tax credit for voluntary cash contributions made to qualified Scholarship Granting Organizations (SGOs) like American GOAL.
What is American GOAL and who administers it?
Answer: American GOAL is the Scholarship Granting Organization (SGO) operated by GOAL Scholarship Program, Inc., a 501(c)(3) organization with nearly two decades of experience administering tax credit scholarship programs. American GOAL manages taxpayer contributions, maintains state-segregated accounts, verifies student eligibility, and remits scholarship payments directly to partner schools.
When does the federal tax credit program take effect, and how long does it last?
Answer: The federal scholarship tax credit takes effect for taxable years beginning January 1, 2027, at which time donors may begin making contributions. The law is a permanent amendment to the Internal Revenue Code and has no statutory sunset date.
Do all 50 states participate in the Federal Scholarship Tax Credit?
Answer: While taxpayers in all 50 states can make contributions and claim the federal tax credit on their federal Form 1040, scholarships can only be awarded to students residing in states that formally opt into the program. Governors (or State Authorities) must submit an annual election and SGO list to the IRS.
Are scholarship funds considered government funding or subject to federal strings?
Answer: No. Based on established judicial and legal precedent, tax credit scholarship funds are private contributions made by private taxpayers to private 501(c)(3) charities, which then award private financial aid. Participation does not convert private schools into recipients of federal financial assistance or trigger federal regulatory burdens like Title IX.
Does the federal scholarship tax credit redirect money from public school budgets?
Answer: No. The credit is funded through private voluntary contributions against individual federal income tax liability. No existing federal, state, or local public education budget allocations are reduced, transferred, or affected.
Donor Eligibility
Who is eligible to contribute and claim the federal scholarship tax credit?
Answer: Any individual federal income taxpayer who is a U.S. citizen or resident alien with federal income tax liability can make a qualified contribution and claim the credit. Corporations (C-Corps), trusts, estates, and electing pass-through entities are not eligible.
What are the contribution caps and credit limits for individual taxpayers?
Answer: Individual taxpayers can claim a 100% credit of up to $1,700 per tax year. Under Proposed Treasury Regulation § 1.25F-2(a)(2), married couples filing jointly are treated as two individual taxpayers and can claim up to $3,400 per year, provided each spouse makes a separate contribution of up to $1,700.
How do I sign up to contribute for an American GOAL tax credit?
Answer:
- Submit Your Pledge: Complete the online 2027 American GOAL Pledge Form at americangoal.org between January 1 and December 31, 2027.
- Make Your Payment: Submit payment to American GOAL by check, ACH transfer, credit card by December 31, 2027.
- Take the Credit: American GOAL provides an official tax acknowledgement and unique donor number for claiming the credit when you file your 2027 tax return in 2028.
Can business owners contribute through their S-Corporation or Partnership?
Answer: No. Contributions made directly by pass-through entities (S-Corps, LLCs, or Partnerships) cannot be passed through to partners or shareholders for a Section 25F credit. Business owners must receive a personal distribution and contribute directly as individual taxpayers.
Can donors participate in both state tax credit programs (like Georgia GOAL) and American GOAL?
Answer: Yes. Taxpayers can participate in both state and federal tax credit programs by making separate contributions to each. Under federal ordering rules, state tax credits are subtracted first, ensuring donors do not receive combined benefits exceeding 100% of their total gift.
How do donors substantiate their tax credit with the IRS?
Answer: American GOAL issues a timely written acknowledgement and a unique donor number to each contributor by January 31 following the tax year of their contribution. Donors report this unique donor number on IRS Form 8525 (Federal Scholarship Tax Credit) which is attached to their Form 1040.
Can donors designate a specific school or a specific student for their contribution?
Answer: Donors are permitted to explicitly designate a specific private school with their contributions. However, federal law strictly prohibits donors from earmarking or designating contributions for any specific student.
Can out-of-state donors (such as grandparents) contribute to support students at a local school?
Answer: Yes. Donors residing anywhere in the U.S. can contribute to American GOAL and designate a participating school, provided the scholarship funds are allocated to the participating state account where the recipient students physically reside.
Student eligibility
Which K-12 students are eligible to receive an American GOAL scholarship?
Answer: To be eligible, a student must reside in a covered participating state, be eligible to enroll in a public elementary or secondary school (K-12), and belong to a household with an annual income not exceeding 300% of Area Median Income (AMI) as defined by the U.S. Department of Housing and Urban Development (HUD) under Section 8 of the U.S. Housing Act of 1937, adjusted specifically for county/metropolitan location and the number of individuals living in the household.
How is household income measured under the 300% AMI threshold?
Answer: Income eligibility is based on HUD Section 8 Area Median Income guidelines for the student's metropolitan area or county, multiplied by HUD's family-size multiplier. Under Treasury Regs, 'household income' strictly counts gross cash income (wages, self-employment, pensions, child support, alimony) and explicitly excludes non-cash asset appreciation.
How do families verify income if applying in early 2027 before filing their 2026 tax return?
Answer: Under Treasury Regulations, families must substantiate household income from the most recent taxable year; however, they are not required to have that year’s tax return completed. Instead, they may provide documentation including a prior-year tax return (e.g., 2025 Form 1040), current year W-2 forms (e.g., 2026-issued by Jan 31), recent consecutive pay stubs, or third-party financial aid reports (such as FACTS or Clarity) which verify income for the most recent taxable year.
Are there streamlined income verification safe harbors available?
Answer: Yes. Families participating in needs-based government programs (SNAP, TANF, WIC, Section 8, or SSI) are categorically eligible upon presenting an award letter dated within 12 months. Household income verification is completely waived for foster children.
Are currently enrolled private school students eligible for scholarships?
Answer: Yes. Unlike some state programs that require public school attendance, Section 25F contains no prior public school enrollment requirement. Existing private school students qualify as long as their household income is not greater than 300% AMI (and they are eligible to enroll in K-12 and reside in the state for which the scholarship funds are designated).
How is student state residency determined for out-of-state or border students?
Answer: Eligibility is determined strictly by the student's legal state of residence under state law, not the physical location of the school. Dependents of active-duty military personnel receive a safe harbor treating them as residents of both their legal domicile and duty station state.
Scholarship awards
What expenses can American GOAL scholarship funds cover?
Answer: American GOAL specifically focuses on funding tuition and school-charged fees for K-12 students attending participating private schools. A student's combined financial aid, including federal tax credit scholarships and state scholarships, cannot exceed the total cost of the student's tuition and required fees at the school.
How are individual scholarship award amounts determined?
Answer: Participating schools recommend scholarship award amounts to American GOAL based on their internal financial aid policies and available designated balances. Awards can range from $100 up to 100% of tuition and fees. American GOAL is solely responsible for determining student eligibility and approving award amounts.
Can federal scholarships be combined or 'stacked' with state scholarships?
Answer: Yes, depending upon state law. Federal scholarships can be stacked with state SGO scholarships, provided state law permits it and total combined aid does not exceed total tuition and required fees. Stacking is prohibited with some state ESA accounts, but not for others
What happens if a scholarship recipient withdraws or transfers mid-year?
Answer: If a student withdraws before the academic year ends, the school must return to American GOAL any scholarship funds received that exceed tuition and eligible fees actually incurred through the date of withdrawal. The returned funds are credited to the school's designated scholarship balance.
Can schools establish merit-based or specialized award criteria?
Answer: Yes. Provided all recipient students meet the 300% AMI threshold, schools have discretion to establish secondary award criteria—such as merit, academic focus, or middle-class tuition relief—within their financial aid process.
SGO Administration
What accreditation requirements apply to partner schools?
Answer: To become an American GOAL participating school, non-public schools must be accredited, or actively in the official process of becoming accredited, by an organization recognized by the state in which the school operates.
What administrative fee does American GOAL charge?
Answer: While federal law allows SGOs to retain up to 10% of contributions for administrative expenses, American GOAL caps its fee at 7%, ensuring at least 93% of donor dollars fund student scholarships.
How does American GOAL manage multi-state accounts and prevent fund commingling?
Answer: American GOAL maintains separate, segregated Section 25F bank accounts and accounting sub-ledgers for each participating state. Funds designated for a specific state cannot be transferred to another state's account.
What is the spending deadline for SGO scholarship funds?
Answer: Treasury Regulations require SGOs to spend at least 90% of contribution income on scholarships by the end of the calendar year following the year of receipt (e.g., 2027 contributions must be spent by Dec 31, 2028). If designated scholarship funds cannot be fully expended by the applicable spending deadline, any remaining funds must be reallocated to another participating school within the same state to ensure compliance with the required expenditure timeframe.
Who is classified as a 'disqualified person' barred from receiving scholarships?
Answer: Disqualified persons include SGO officers/directors, substantial contributors (donors giving >$5,000 and >2% of an SGO’s annual receipts per state), school officials serving as decision-makers on scholarship selection committees, and family members of any of these individuals.