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  • Apr 15 2016

Is Private School Tuition Tax Deductible?

It’s that time of year again—the time of year when American taxpayers everywhere try to find every potential tax credit or deduction to reduce their tax liability. Parents who chose or are considering choosing a private education for their kids often ask, “Is private school tuition tax-deductible?”

The short answer is: sometimes.

Only eight states—Alabama, Illinois, Indiana, Iowa, Louisiana, Minnesota, South Carolina, and Wisconsin—offer private school choice programs known as individual tax credits and deductions. Each year, hundreds of thousands of taxpayers claim these credits.

But what are they? And how do they work? Watch this video for a quick explanation:

 

 

Individual tax credits and deductions can make private school tuition—or, sometimes, homeschooling and other educational expenses—tax-deductible. They are meant to help reimburse parents for at least a portion of their out-of-pocket private schooling expenses. Every state program is unique, so some of these credits and deductions offer parents more savings than others.

Check out the table below for eligibility requirements, general program funding information and links to more resources from state departments of revenue and more.

Program NameProgram DetailsMore Resources
Alabama Accountability Act of 2013 Parent-Taxpayer Refundable Tax CreditsEligibility

- Only 4 percent of families eligible statewide

- Parents with children in schools classified as failing can apply when they transfer students to certain non-failing schools.

-See if you might be eligible with this quick eligibility test here.

Funding

- Average value is $2,699. Worth lesser of 80 percent of annual state cost of attendance at K–12 or actual cost of children's schooling.

More Useful Information

- Any unused tax credit can be taken as a tax rebate if amount of tax credit is more than parents owe in taxes.
- More on program eligibility
Iowa Tuition and Textbook Tax CreditEligibility

- 100 percent of taxpaying families with children are eligible statewide

- Only the spouse claiming dependents can claim the credit. See if you might be eligible with this quick eligibility test here.

Funding

- Average tax credit value is only $115. Worth 25 percent of the first $1,000 paid for each dependent for tuition and textbooks.

Additional Information

- Tuition is for anything other than textbooks that are related to "subjects legally and commonly taught in Iowa's public elementary and secondary schools."

- Eligible items include books, special clothing for concerts/plays, driver's ed fees paid to K–12 schools, extracurricular activity fees and materials for extracurriculars, (musical instruments and sheet music, etc.), parking, shoes for sports, tuition at accredited school but not for religious instruction.
- Expanded instructions for claiming the Tuition and Textbook Credit
Illinois Tax Credits for Educational ExpensesEligibility

- 100 percent of taxpaying families with children are eligible statewide.

-Homeschoolers can claim credit for qualified education expenses in excess of $250/year if they are the legal parent/guardian, parent and student were Illinois residents when expenses were paid, and student attended a school satisfying truancy law.

- See if you might be eligible with this quick eligibility test here.


Funding

- Average tax credit value is only $280.

- Allowed 25 percent of expenses after the first $250, but not to exceed $500 in a year.

More Helpful Information

- Qualified expenses include tuition, fees for workbooks or grade books, book rental fees, curriculum rental fees, lab fees, shipping charges, sales taxes.

- Non-qualified expenses include non-consumable textbooks, flash cards, wall maps, etc; expenses paid for items that will remain in student/parent possession; mileage and travel expenses; tutoring or enrichment classes outside the required curriculum;

- Same rules for private schools, where qualified expenses include tuition, book fees, and lab fees.
- Rules and requirements for homeschool families
- Rules and requirements for other parents
Indiana Private School/Homeschool DeductionEligibility

- 9 percent of families with children are eligible statewide.

- Eligible child can be claimed on parents’/guardians’ taxes and is eligible to receive public K–12 education in an Indiana school corporation.

- Child must meet obligation for compulsory attendance.

- Take this quick eligibility test to see if you may be eligible.

Funding

- Average deduction claimed is $1,805.

- Up to $1,000/dependent can be claimed.

More Helpful Information

- Qualified expenses include private school tuition and fees, computer software, textbooks, workbooks, curricula, school supplies (not PCs), other materials used primarily for academic instruction.
- Reporting instructions and form
Louisiana Elementary and Secondary School Tuition DeductionEligibility

- All K–12 private school students in Louisiana are eligible

- Take this quick eligibility test to find out if your child is eligible for this deduction.

Funding

- Average deduction amount is $4,060. Deduction is worth up to $5,000 per dependent.

- Parents can claim up to 100 percent of private school tuition paid per student per year.

More Helpful Information

- Allowed expenses include elementary and secondary school tuition; school uniforms used on a daily basis; textbooks, curricula, and other instructional materials required by school; and school supplies required by school
- School Tuition Deduction summary and rules
Minnesota Education DeductionEligibility

- 100 percent of taxpaying families with children are eligible.

- Any parent or guardian who spends money on approved education expenses can receive the deduction

- Qualifying child must attend school in MN, IA, ND, SD, or WI. Take our eligibility test to see if your child is eligible.

Funding

- Average tax deduction is $1,154.

- Tax deduction is worth 100 percent of the amount spent on education, up to $1,625 for grades K–6, $2,500 for grades 7–12.

More Helpful Information

- Eligible expenses include books, tutors, academic after-school programs, tuition and fees for private schooling, and transportation costs paid to others (though not self-transportation costs)
- Deduction and credit rules
- Quick Fact Sheet
- Qualifying homeschool expenses
Minnesota K–12 Education CreditEligibility

- 20 percent of families with children are income-eligible statewide.

- Credit is phased out for taxpayers earning more than $33,500. The maximum allowable credit is reduced for income over this amount, depending on family size.

- Take this quick test to find out if you are able to claim this credit.

Funding

- Average credit value is just $259.

- Refundable tax credit available for 75 percent of the amount spent on educational expenses other than tuition, up to $1,000 per child.

More Helpful Information

- Allowable expenses include books, tutors, academic after-school programs, and other non-tuition educational expenses.
- Qualifying homeschool expenses
South Carolina Refundable Educational Credit for Exceptional Needs ChildrenEligibility

- 13 percent of students are eligible statewide.

- Parents of students designated by the Department of Education as a “child with a disability.” Students who have been diagnosed within the past three years of an acute or chronic condition that significantly impedes the student’s ability to succeed in school (ie. deafness, blindness, orthopedic disability, neurodevelopmental disability, etc.) also qualify.

- Parents must also believe the public school district does not meet the student’s needs, and student must attend an independent school.

- - Tax credit summary and guide
Wisconsin K–12 Private School Tuition DeductionEligibility

- 15 percent of students are eligible statewide.

- Any Wisconsin taxpayer who pays private school tuition for their child is eligible for this deduction.

- Use this eligibility test to find out if you can claim this deduction.

Funding

- Deduction is worth up to $4,000 per child in grades K–8 and up to $10,000 per child in grades 9–12.

More Helpful Information

- Deduction is only available for private school tuition, not for other education-related expenses.

- If a student is enrolled in grades eight and nine in the same tax year, the deduction may only be claimed for one grade.
- Deduction FAQs

How Much Can They Save?

How much money could an individual tax credit or deduction save private school parents? That depends on a variety of factors, including the parents’ income, the amount of the deduction or credit, and the way the program works.

To give an idea of how a tax credit or deduction could work, here are a few examples:

Tax credits lower the amount of taxes owed, dollar for dollar. So if a parent owes $200 in state taxes and has a $500 refundable tax credit, that parent will receive a $300 tax refund. If the parent owes $200 and has $500 in a non-refundable tax credit, the parent will owe nothing in taxes, but won’t receive a tax refund from that credit.

Tax deductions depend on a taxpayer’s tax bracket. Instead of reducing the amount of taxes one owes, as with tax credits, tax deductions reduce the amount of taxable income. This amount equals the amount of the deduction times the taxpayer’s bracket. For taxpayers in the 10% income bracket, a $1,000 deduction will reduce taxable income by $100 (=$1,000×0.10). For taxpayers in the 25% bracket, a $1,000 deduction will reduce taxable income by $250 (=$1,000×0.25).

When taxable income is reduced, total taxes owed will also fall. The exact financial effect of tax deductions varies widely, depending on a variety of factors. Consult with a tax professional to find out how specific tax deductions could affect tax liability.

Because most individual tax credit and deduction programs often reimburse parents only marginally for their private schooling expenses, the programs don’t place private education within reach for many lower income families. Though these programs do help some families, they’re not the best option for expanding educational opportunity for all children.

Programs that give parents access to significant funding—before they’ve had to pay private school expenses out of pocket—open up educational choice to many more families. These programs include:

Education Savings Accounts (ESAs) for K–12

ESAs, not to be confused with college education savings accounts, are the most flexible educational choice program for K–12 families. These programs give parents access to an account or debit card that can be used for a variety of educational purposes, including private school tuition, tutoring, therapy, and more. Check out the video to see how they work:

 

To see if your state has an ESA program, check out our School Choice in America dashboard.

Vouchers

School vouchers allow families to choose the best educational options for their kids by moving their kids to private schools. The voucher then covers part or all of the child’s tuition, putting private education within reach for many families. Watch the video for more details:

 

To see if your state has a school voucher program, check out our School Choice in America dashboard.

Tax-Credit Scholarships

These programs allow donors, whether individuals or businesses, to get a personal or business tax credit when they donate to nonprofit organizations that provide students with scholarships to private schools. Like vouchers, these scholarships cover part or all of a child’s private school tuition, allowing more parents to make the best educational choices for their kids. Learn more from this short video:

 

To see if your state has a tax-credit scholarship program, check out our School Choice in America dashboard.

While individual tax credits and deductions are a start on the road to school choice for all of America’s families, these other programs work better for most families. Still, parents who choose private schools and wonder if private school tuition is tax-deductible should stay informed about credits and deductions like these.

Federal Tax Deductions for Education

What about federal deductions and credits for education? Most of the federal government’s education-related tax credits and deductions are geared towards higher education and career-furthering continuing education.

However, private school parents can take advantage of a Coverdell Education Savings Account to grow tax-free interest on their savings. Money contributed to a Coverdell account—up to $2,000 per year—grows with tax-free interest. Distributions aren’t taxed so long as they’re used for the beneficiary’s expenses at a qualified educational institution, including private elementary and secondary schools and private or public universities.

Parents who know early on that they’ll send a child to private K–12 school can begin saving in a Coverdell. Because the interest is tax free, this is a better option for saving for private school expenses than a regular savings or investment account, where accrued interest is taxed.

Coverdell ESAs have limitations on contributions and distributions, and may have problematic maintenance fees and other charges associated with them. Fees vary by Coverdell ESA provider, and may affect low-balance accounts more than high-balance accounts. Also, money saved in a Coverdell can also affect potential college financial aid.

Because navigating tax codes and college aid rules can be a complicated task, we encourage all of our readers to consult with a financial expert before moving forward with these accounts or any other type of individual tax credit or deduction program.

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