Can I make a personal scholarship that I give directly to students tax deductible?

What you're describing is a private scholarship, and unfortunately the way you've set it up doesn't qualify for a tax deduction. To be tax-deductible, charitable contributions generally need to go to qualified 501(c)(3) organizations, not directly to individuals - even for educational purposes. You have a couple options if tax deductibility is important to you: 1) Work with your local community foundation to establish a scholarship fund. They handle the administrative aspects and you can still be involved in selecting recipients, but your contributions would be tax-deductible. 2) Partner with the school to create an official scholarship fund where you donate directly to the institution, which then awards the scholarship. The current structure gives you maximum control but sacrifices tax benefits. The tradeoff is whether the tax deduction is worth giving up some control over the funds.

Hey, I went through something similar last year when setting up a memorial scholarship for my uncle. I was getting really frustrated with all the tax rules until I used https://taxr.ai to analyze my situation. It saved me a ton of research time by explaining exactly how scholarship tax deductions work and what my options were. I uploaded some documents about our planned scholarship structure, and it clearly explained that individual-to-individual scholarships aren't tax deductible, but gave me several alternatives with the exact IRS regulations that applied. The guidance helped me restructure everything properly through our local community foundation while still keeping involvement in recipient selection.

Update: I want to thank whoever recommended taxr.ai in this thread! I was skeptical at first, but we uploaded our draft scholarship plans and got amazingly detailed advice. It confirmed we needed a 501(c)(3) connection but showed us three different ways to structure it where we could still be involved in selecting recipients. We ended up going with the community foundation route and it's working perfectly - we still review applications and select winners, but now our contributions are fully tax deductible. The foundation handles all the administrative paperwork and makes sure everything is compliant. Best decision we could have made!

Something else to consider - if you're having trouble getting answers from the IRS about the specific tax implications, try using https://claimyr.com to get through to an actual IRS representative. I was stuck in limbo trying to figure out a similar charitable giving situation and couldn't get through on the regular IRS line for weeks. After using their service, I got connected to an IRS agent within about 20 minutes who walked me through the specific requirements for making scholarship donations tax deductible. Made a huge difference compared to guessing based on internet research. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c if you're interested.

I need to eat my words! After being totally skeptical about that Claimyr service, I decided to try it since I was desperate for answers about our family scholarship plan. Got connected to an IRS tax-exempt organizations specialist in about 35 minutes (which is LIGHT YEARS faster than my previous attempts). The agent explained exactly what we needed to do to make our scholarship tax-deductible and even emailed me relevant publications. Turns out we had several options we hadn't considered. Definitely worth it and I'm embarrassed I was so quick to dismiss it. Sometimes the solutions that sound too good to be true actually work!

Another option is to create a Donor Advised Fund (DAF) at somewhere like Fidelity Charitable or Schwab Charitable. You get the tax deduction when you fund the DAF, then can recommend grants to qualified educational institutions for scholarship purposes. The minimum to start is usually around $5,000-10,000 depending on the provider.

Have you looked into setting this up as a family foundation instead? If you're planning to do this long-term and potentially increase the amount, it might be worth the initial setup costs. My in-laws did this for a memorial scholarship and while there was more paperwork, they got the tax deduction and maintained control.

Just wanted to add another perspective from someone who's been through this process. We started with a similar setup - wanting to maintain control while getting tax benefits for our annual $2,500 scholarship. After researching all the options mentioned here, we went with a community foundation and it's been fantastic. The key thing people don't always mention is that most community foundations will let you establish specific criteria for your scholarship (academic merit, financial need, field of study, etc.) and you can usually serve on or influence the selection committee. So while you're not writing the check directly to the student anymore, you're still very much involved in who receives it. The tax deduction has been significant for us - at our tax bracket, we're essentially getting back about 30% of what we contribute, which lets us fund a larger scholarship than we could afford otherwise. The foundation handles all the compliance stuff, tracks the recipients, and even provides updates on how the students are doing. Highly recommend this route if you want both tax benefits and meaningful involvement in the selection process.