Federal tax policy keeps moving even when April has come and gone. Over the past few weeks, the IRS, the Tax Court, and federal appeals courts have issued guidance and rulings that touch on K-12 education funding, cryptocurrency, charitable giving, clean-energy projects, and IRS operations itself. Below, our CPAs walk through the developments most likely to affect business owners, investors, and individual filers as we head toward 2027.
1. A New Federal Scholarship Tax Credit Arrives in 2027
Congress has historically left school-choice tax incentives to the states, and nearly half the states already run tax credit scholarship programs. That changes starting with the 2027 tax year (returns filed in early 2028), when a new federal scholarship tax credit (FSTC) takes effect. The credit was enacted as part of last summer's reconciliation legislation and works like this:
- Up to $1,700 nonrefundable credit for cash donations to qualifying scholarship-granting organizations (SGOs), available to single and joint filers alike with no income phase-out.
- Offsets both regular tax and AMT, and unused credit carries forward up to five years.
- State opt-in required. The credit is only available for donations to SGOs located in states that elect to participate and submit an approved SGO list to the IRS. As of mid-May, 27 states had opted in, including Florida, Georgia, Ohio, Texas, and Virginia — more may join before 2027.
- No double-dipping. The FSTC is reduced by any state credit already claimed for the same donation, and you cannot also claim a charitable deduction for a donation used to generate the FSTC.
Scholarships funded this way are limited to households earning at or below 300% of the area's median gross income, must cover qualified K-12 expenses (tuition, tutoring, special-needs services, books, uniforms, and similar costs), and aren't taxable to the student who receives them.
Pro Tip: If your state hasn't opted in yet, hold off on assuming the FSTC applies to your giving plan. Confirm SGO eligibility and your state's participation status before donating with the credit in mind.
2. Crypto Staking Rewards Are Taxable on Receipt — Tax Court Confirms
Investors hoping for deferral on staking income got a clear answer from the Tax Court. A taxpayer argued that tokens he received as staking rewards shouldn't be taxed until he sold them. The court disagreed: because he had the ability to sell the tokens at any time, with no substantial restrictions, he had dominion and control over them — meaning their fair market value was taxable income in the year received. This lines up with IRS guidance issued in 2023, which treats staking rewards as gross income once the taxpayer can freely transact with the tokens.
Separately, a House proposal would let taxpayers elect annually to defer staking income until they dispose of the underlying property, rather than recognizing it on receipt. That bill hasn't become law, so for now, the dominion-and-control standard governs. Investors should also note that brokers will be required to issue Form 1099-DA for digital asset sales, with new electronic-delivery procedures phasing in for forms sent in 2027 — though decentralized (DeFi) exchanges remain outside that reporting regime.
3. Charitable Deductions Live or Die on Paperwork
A costly Tax Court case is a reminder that good intentions don't substitute for proper documentation. An LLC donated real estate valued at $4.2 million to charity but never obtained a contemporaneous written acknowledgment (CWA) that met the tax code's specific requirements. Result: the entire deduction was disallowed. The substantiation rules that apply to most donors include:
- Cash gifts: Keep canceled checks, EFT receipts, credit card statements, or a letter from the charity.
- Gifts of $250 or more (cash or property): Obtain a CWA from the donee organization before filing.
- Noncash donations over $500: File Form 8283 with your return.
- Property gifts over $5,000: Get a qualified written appraisal.
If you're planning a significant charitable gift this year, loop in your CPA before, not after, the transfer closes.
4. Wind & Solar Tax Credits: Deadlines in Flux
Recent budget legislation rolled back clean electricity tax credits for wind and solar projects, generally requiring construction to begin by July 4, 2026, or — if construction starts after that date — the project must be placed in service before 2028 to still qualify. IRS guidance narrowed how "beginning of construction" is measured, dropping the long-used "five-percent safe harbor" that let developers lock in eligibility once they'd incurred 5% or more of a project's cost. A federal district court has since vacated that guidance, finding the IRS couldn't justify eliminating the safe harbor for large wind and solar projects while preserving it for other clean-energy technologies.
Developers and investors with projects in the pipeline should treat the construction-start rules as unsettled and revisit eligibility analysis as further guidance or appeals develop.
5. Hobby Losses, Estate Planning, and IRS Operations
A few additional rulings and operational changes are worth noting:
- Hobby loss rules still bite. The Tax Court disallowed years of horse-breeding losses for a couple who never operated the activity in a businesslike way or showed a genuine profit motive — a reminder to document business operations carefully for any activity that mixes income with personal enjoyment.
- Late-stage estate planning faces scrutiny. An appeals court affirmed that a deathbed transfer of assets into a limited partnership, made shortly before the owner's death, was primarily tax-motivated and not a bona fide sale — so the full date-of-death value of the partnership's assets was included in the estate. Estate-planning moves work best when made well ahead of a health decline, not in response to one.
- Social Security wage base rising. Trustees project the 2027 wage base cap at $190,200, up $5,700 from this year, with the final figure expected in mid-October.
- IRS staffing has shrunk sharply. The agency's workforce fell roughly 28% over the past year, with steep declines among revenue agents and tax examiners, contributing to fewer traditional audits — though computer-generated notices and other compliance checks have picked up some of the slack.
Bottom Line: Several of these changes — the FSTC, the clean-energy construction deadlines, and the crypto reporting rules — are still being shaped by state opt-ins, litigation, and forthcoming guidance. DRDS CPAs monitors these developments so your plan stays current. Schedule a strategy session to review how they apply to you.
Questions about how any of these federal changes affect your specific situation? Contact our team of experienced CPAs for personalized guidance.
