TL;DR: Indiana has run a state SGO tax-credit program since 2010, and on January 1, 2027 a federal one joins it. The state credit gives donors 50% back on Indiana taxes; the federal Education Freedom Tax Credit gives up to $1,700. The federal program reaches more settings, including homeschool, but uses a different income test, and SGOs must be approved by December 31, 2026 to take part.
What is Indiana's SGO tax credit?
It is a 50% Indiana tax credit for donations to a certified scholarship granting organization, which passes the money to students as scholarships at its partner schools. The whole program is capped at $18.5 million in credits each state fiscal year, a limit in place since July 1, 2023.
Students qualify if they have legal settlement in Indiana, are at least four and under 22 by August 1, and live in a household within 400% of the free and reduced-price lunch threshold. Each SGO may add its own rules. The five SGOs that reported activity for 2024-25 awarded 15,867 scholarships worth about $27.7 million between them, according to IDOE's annual SGO report. Unlike the Choice voucher, SGO scholarships can start in pre-K, which makes them one of the few public-policy routes to help a four-year-old in a private school's preschool room.
What is the federal Education Freedom Tax Credit?
It is a nonrefundable federal tax credit of up to $1,700 per taxpayer for contributions to participating SGOs, created by the 2025 federal tax law and beginning January 1, 2027. States had to opt in. Governor Mike Braun announced Indiana's opt-in on January 22, 2026, and IDOE says the IRS listed Indiana among 27 participating states on June 8, 2026.
Scholarships funded this way can go to K-12 students in households at or below 300% of the area's median gross income, and IDOE says they can support students in traditional public, charter, nonpublic and homeschool settings. Qualifying expenses include tuition, fees, special education services, books, supplies, technology, tutoring and before- and after-school programs. Unused donor credit carries forward up to five years.
State SGO credit vs federal credit: how do they differ?
They share organizations and purpose but differ on the donor benefit, the student income test and where students can be enrolled.
| Indiana SGO credit | Federal Education Freedom Tax Credit | |
|---|---|---|
| Donor benefit | 50% Indiana credit | Up to $1,700 federal credit |
| Program cap | $18.5 million a year statewide | Per-taxpayer limit |
| Student income test | Within 400% of the lunch-program line | At or below 300% of area median income |
| Student ages and settings | Age 4 to 21, at participating accredited nonpublic schools | K-12, including public, charter, nonpublic and homeschool |
| Start | 2010 | January 1, 2027 |
The two income tests do not line up neatly. The state test is built on the federal free and reduced-price lunch guideline, which is set nationally, while the federal credit's test uses the median income of the family's own area, so where a household lands depends on both its size and the local median. A family can be eligible under one and not the other.
What the federal credit is not: money paid to families by the IRS, a replacement for the Choice voucher, or a universal program. A family still applies to an SGO, and the SGO still decides awards within the rules.
Which SGOs serve Indianapolis-area schools today?
Three dominate IDOE's partner list for the four counties: the Institute for Quality Education, Sagamore Institute Scholarships for Education Choice and the Lutheran SGO of Indiana. IQE, based downtown and formerly known as Education Choice Charitable Trust, reported 6,224 scholarships worth $12,805,073 in 2024-25. Sagamore reported 3,174 scholarships worth $8,615,057.91 and the Lutheran SGO 3,928 worth $3,864,715.
In our file, 105 metro schools appear on IDOE's SGO partner list dated October 21, 2026, including several large independent schools that are not on the Choice list at all. Each listing in the directory shows the flag. IDOE will also be the state's operational lead for the federal program, certifying SGOs and publishing the annual list.
What should Indianapolis families do before January 1?
Mostly, ask questions. Families can't apply for federal-credit scholarships until SGOs are approved and funded, and an organization has to be approved by IDOE by December 31, 2026 to take part in the 2027 tax year. Before then:
- Ask your school which SGO it partners with, and whether that SGO has applied for federal approval.
- Check your household against both income tests; a family can be over one line and under the other.
- If you homeschool, watch for SGOs that announce federal scholarships for home-based students, since Indiana's other programs don't fund home instruction.
- Keep using the voucher: neither credit changes your Choice Scholarship, and SGO grants stack on it.
We will add the federal SGO list to our federal credit page once IDOE publishes it.
Frequently asked questions
What is Indiana's SGO tax credit?
A 50% Indiana tax credit for donations to certified scholarship granting organizations, capped at $18.5 million statewide each fiscal year.
When does the federal Education Freedom Tax Credit start?
January 1, 2027. Donors can claim up to $1,700 for gifts to participating SGOs.
Can homeschool students get a federal-credit scholarship in Indiana?
IDOE says the federal credit can support homeschool students in households at or below 300% of area median income, through participating SGOs.
Which SGOs serve Indianapolis-area schools?
Mainly the Institute for Quality Education, Sagamore Institute Scholarships for Education Choice and the Lutheran SGO of Indiana.
Related questions
- How do SGO scholarships stack with the voucher?
- What Indiana money reaches homeschool and hybrid learners?
- Can an SGO scholarship pay for pre-K?
- In what order should we stack funding?