New Federal Scholarship Tax Credit Will Allow Individual Taxpayers to Redirect Up to $1,700 and Married Couples Filing Jointly Up to $3,400 of Their Federal Income Taxes to Scholarships for Memphis Students
Beginning January 1, 2027, a new Federal Scholarship Tax Credit will give taxpayers a choice they have never had before: the opportunity to redirect a portion of the federal income taxes they already owe to help provide scholarships for students.
Memphis Opportunity Scholarship Trust (MOST), a nonprofit organization that has provided more than $28 million dollars in need-based scholarships to Memphis students since 1998, will participate in the program as an approved Scholarship Granting Organization.
The most important thing for taxpayers to understand is that this is not an additional expense. It is money they already owe in federal income taxes. This a tax credit not a tax deduction.
Under the new program, eligible individuals can redirect up to $1,700 (3,400 for married couples filing jointly) per year through an approved Scholarship Granting Organization such as MOST to support educational scholarships.
HOW DOES IT WORK?
Think of it this way. If you owe $10,000 in federal income taxes, you normally pay that $10,000 to the federal government. Beginning in 2027, you may instead choose to redirect $1,700 ($3400 if married and filing jointly) through MOST to support scholarships at the school of your choice. If you qualify for the full tax credit, your federal income tax liability would be reduced from $10,000 to $8,300 ($6600 if filing a joint return).
You are not paying $1,700 more. You are choosing where $1,700 of the taxes you already owe can go.
This is what makes the program different from a traditional charitable donation. A tax deduction reduces the income on which you pay taxes, while a tax credit directly reduces the amount of federal income tax you owe, dollar for dollar.
WHAT IF YOU DO NOT WANT TO SEE A DIFFERENCE IN YOUR MONTHLY BUDGET
MOST will give taxpayers the option to redirect their tax credit to the school of their choice biweekly, monthly, or all at once.
Individuals who do not want to see a difference in their monthly budget can adjust their W-4 withholding to account for the tax credit, allowing them to contribute throughout the year without increasing their overall annual household expenses.
Taxpayers should consult their tax professionals about making the adjustments.
KEEPING TAX DOLLARS IN MEMPHIS
For more than 25 years, MOST has helped Memphis families access educational opportunities through need-based scholarships. The organization now partners
with 45 private schools throughout Shelby County and has provided more than $28 million in scholarships to over 4,000 students.
The new Federal Scholarship Tax Credit will create an additional opportunity for the Memphis community to support students and families.
“This is an incredible opportunity for Memphis,” said Bob Solmson, Founder of MOST. “We all pay federal income taxes, but now we will have the opportunity to redirect a portion of those dollars to help students right here in our community instead of sending that money to the federal government. We will be able to choose to put some of it toward scholarships for Memphis children, at no additional cost to eligible taxpayers.”
WHICH STUDENTS CAN RECEIVESCHOLARSHIPS?
The program will provide scholarships for eligible students in kindergarten through 12th grade. To qualify, students must be eligible to attend a public elementary or secondary school and live in a household with income at or below 300% of the area’s median income, adjusted for family size.
In the Memphis area, families of four earning approximately $240,000 annually will qualify, although the official income limits for our area will be released under the federal guidelines.
This means the program can benefit a broad range of Memphis families, including many who may not have previously qualified for traditional need-based scholarships.
This program will turn federal tax dollars we already owe into meaningful educational opportunities, opening doors and creating brighter futures for Memphis students. Same taxes. Brighter futures.
To learn more about the Federal Scholarship Tax Credit and how you can help provide educational opportunities for Memphis students, visit MEMPHISSCHOLARSHIPS.ORG or email Finy Shirley at fshirley@mostmemphis.org. Tax situations vary. Taxpayers should consult their tax professional regarding their individual eligibility.