The Education Freedom Tax Credit is a set of federal rules that aren't optional, and they apply whether you're forming an SGO or you've run scholarships for years. The donor CRM, scholarship database, and spreadsheets most teams would stitch together can't legally hold §25F funds. SGO Software is built around the rules from the ground up, so compliance is the default, not a scramble before an audit.
§25F doesn’t just let you collect tax-credit donations, it tells you how. The statute bars commingling: qualified contributions must sit in separate accounts, never mixed with your other funds. That one rule alone breaks most existing setups, because a donor CRM, a scholarship database, and a spreadsheet were never built to keep §25F money segregated. Here are all eight requirements, and how the platform handles each.
The statute requires qualified contributions to sit in one or more dedicated accounts, never mixed with other money. The platform holds each segregated balance so the line never blurs, and funds move on regulated rails we never custody.
At least 90% of donations must go to scholarships, and no more than 10% to administration. We track every dollar against the cap continuously, so you stay inside 10% by construction, not by reconstructing it the night before an audit.
Awards go to income-eligible students at or below 300% of area median gross income (AMGI), verified against documents. The AMGI lookup and the eligibility math are built in.
Prior-year recipients first, then siblings, and no donor can earmark a donation for a named student. The award workflow enforces the order so the rule holds itself.
Scholarships must reach ten or more students who don't all attend the same school. The dashboard shows your distribution against the rule at a glance.
Each donor gets the exact document they need to claim the $1,700 federal credit, generated as the donation settles, never reconstructed.
Each state independently verifies its SGOs, so self-certification won't do. We generate the state and federal reports from one reconciling ledger, correct by construction.
A complete, reconstructable trail of every donation, award, and disbursement, so an independent financial audit is answer-and-done, not a rebuild from spreadsheets.
Based on §25F as enacted (OBBBA §70411) and IRS Notice 2025-70. Treasury’s final regulations are still being written; the platform tracks the rules as they’re finalized.
§25F compliance isn’t lighter because you’re big. The separate-account rule, the 90/10 cap, document-backed eligibility, the priority order, the federal audit: they apply the same to a first-year community fund and a national foundation.
And the tools most established orgs already run on, a donor CRM here, a scholarship database there, spreadsheets for the rest, were never built to keep §25F funds segregated. They can’t legally hold §25F money. Bolting the credit onto that old infrastructure is exactly where the audit risk lives. SGO Software is the §25F-native layer underneath, whether it’s your first scholarship or your hundred-thousandth.
Compliance is built into every surface, not a separate module.
The separate accounts and receipts live on the donor surface, eligibility on the family surface, reconciliation on the school surface, and the 90/10 tracking and reporting in the admin console. One reconciling ledger underneath them all means the reports are correct by construction.
The Education Freedom Tax Credit is a federal, dollar-for-dollar tax credit for donations to Scholarship Granting Organizations, effective January 1, 2027. For a plain-English explanation of the program, who it helps, and where each state stands, see eftccredit.com.
January 1, 2027 is the same starting line for every SGO. See the platform built from the ground up for §25F: it turns every school you serve into a donor channel, then handles eligibility, disbursement, and reporting in one compliant system. You receive donations and choose scholarships, the platform does the rest.