Is Private School Tuition Tax Deductible?
Private school can be expensive. Whether your children are already in private school or you’re considering it for the future, you’re probably looking for ways to save money. This post brings together the existing private school tuition tax credit and deduction programs from the federal government to the states and more.
Federal Programs & Tax Breaks for K-12 Private Education
There is no simple federal tax credit or deduction for private K–12 educational expenses. Most of the federal education-related tax credits and deductions are geared toward higher education and career-furthering continuing education, but there are other federal programs, such as Coverdell Education Savings Accounts, that help parents save money on K–12 private schooling indirectly.
Coverdell Education Savings Account (ESA)
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. The money parents spend from these accounts, also known as distributions, isn’t taxed so long as it is 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.
To read more about the difference of Coverdell ESAs and ESAs in K-12 education, click here.
State-Based Tax Breaks for K-12 Private School Expenses
Some websites will say you can’t get any tax breaks for sending your kids to private schools from kindergarten through 12th grade, but that’s not entirely accurate. Some states do offer families tax relief for K–12 private school expenses.
Alabama, Illinois, Indiana, Iowa, Louisiana, Minnesota, Ohio, South Carolina and Wisconsin offer private school choice programs known as individual tax credits and deductions. This video explains how these credits and deductions work.
Each year, hundreds of thousands of taxpayers claim these state-based credits, and you could save anywhere from $100 to $10,000 based on your state’s programs. Exactly how much money you get back depends on where you live.
Alabama Accountability Act of 2013 Parent-Taxpayer Refundable Tax Credits
Who Can Use It: Parents with children in schools classified as failing can apply when they transfer students to certain non-failing schools.
Average Value: $2,814. Worth lesser of 80 percent of annual state cost of attendance at K–12 or actual cost of children’s schooling.
Take the Alabama Accountability Act of 2013 Parent-Taxpayer Refundable Tax Credits Eligibility Test
Illinois Tax Credits for Educational Expenses
Who Can Use It: All taxpaying families with children who pay to send their kids to private school 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.
Average Value: $244. Allowed 25 percent of expenses after the first $250, but not to exceed $500 in a year.
Take the Illinois Tax Credits for Educational Expenses Eligibility Test
Indiana Private School/Homeschool Deduction
Who Can Use It: Eligible child must be able to be claimed on parents’/guardians’ taxes and must be eligible to receive public K–12 education in an Indiana school corporation. Child must meet obligation for compulsory attendance.
Average Value: $1,811. Up to $1,000 per dependent can be claimed.
Take the Indiana Private School/Homeschool Deduction Eligibility Test
Iowa Tuition and Textbook Tax Credit
Who Can Use It: All taxpaying families with children who pay to send their kids to private school are eligible statewide. Only the spouse claiming dependents can claim the credit.
Average Value: $133. Worth 25 percent of the first $1,000 paid for each dependent for tuition and textbooks.
Take the Iowa Tuition and Textbook Tax Credit Eligibility Test
Louisiana Elementary and Secondary School Tuition Deduction
Who Can Use It: All K–12 private school students in Louisiana are eligible.
Average Value: $5,481. 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.
Take the Louisiana Elementary and Secondary School Tuition Deduction Eligibility Test
Minnesota Tax Breaks
Minnesota Education Deduction
Who Can Use It: 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.
Average Value: $1,184. 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.
Take the Minnesota Education Deduction Eligibility Test
Minnesota K–12 Education Credit
Who Can Use It: 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.
Average Value: $250. Refundable tax credit available for 75 percent of the amount spent on educational expenses other than tuition, up to $1,000 per child.
Take the Minnesota K–12 Education Credit Eligibility Test
Ohio Tax Breaks
K–12 Home Education Tax Credit
Who Can Use It: All Ohio students who are excused from the state’s compulsory attendance law for the purpose of home instruction are eligible.
Maximum Value: $250. This nonrefundable tax credit is worth up to $250 for qualifying home education expenses, including books, supplementary materials, supplies, computer software, applications or subscriptions.
Take the Ohio K–12 Home Education Tax Credit Eligibility Test
K–12 Nonchartered Private School Tax Credit
Who Can Use It: Families are eligible to receive the tax credit if at least one of their dependents is enrolled in a nonchartered private school and their total annual household income is less than $100,000.
Maximum Value: $1,000. Eligible families with a total annual household income of less than $50,000 may receive up to a $500 tax credit. Eligible families with a total annual household income that is between $50,000 and $100,000 can get back up to $1,000.
Take the Ohio K–12 Nonchartered Private School Tax Credit Eligibility Test
South Carolina Refundable Educational Credit for Exceptional Needs Children
Who Can Use It: 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 (i.e. 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.
Average Value: $7,353. Worth the lesser of (1) $11,000 per student or (2) their children’s actual cost of attending school.
Wisconsin K–12 Private School Tuition Deduction
Who Can Use It: Any Wisconsin taxpayer who pays private school tuition for their child is eligible for this deduction.
Average Value: $4,912. Deduction is worth up to $4,000 per child in grades K–8 and up to $10,000 per child in grades 9–12.
Take the Wisconsin K–12 Private School Tuition Deduction Eligibility Test
529 Plans for K–12 Expenses
Section 529 savings plans are state-based programs that have been around for decades to help families save for their children’s future college expenses, but the federal government recently changed the rules so these plans can be used for K–12 education, such as private school tuition. The Tax Cuts and Jobs Act of 2017 allows parents to use up to $10,000 per year from a 529 account to cover private K–12 expenses. However, not all states have yet opted to follow the new federal rules for private K–12 expenses, so be sure you understand how different states’ rules work before making a withdrawal.
Here’s a quick overview of what you should know:
• You don’t have to live in a state to open a 529 account there, so many families shop around for the best plan.
• A 529 plan allows you to invest money tax-free as long as you use the withdrawals only for qualified expenses. In this way, it’s similar to a 401(k) or IRA, but it’s specifically for education. Paying no taxes on the interest you earn means the money can grow more quickly.
• On the federal level, qualified 529 plan withdrawals are free from income taxes or capital gains taxes. The actual savings you earn will depend on your tax bracket. People in higher tax brackets will see greater savings than those in lower tax brackets.
• The majority of states that have an income tax also offer income tax benefits on qualified 529 withdrawals. Rules vary state to state.
• Many states also offer in-state taxpayers incentives, in the form of credits or deductions, for contributing to a 529 account. Again, though, the rules vary from state to state.
Additional Private School Financial Support Opportunities
Private School Choice Programs
Before you pay for K–12 private school out of pocket, check to see whether your state has a private school choice program and whether your child would qualify. These programs can provide families financial aid to send their kids to private schools from kindergarten through 12th grade via scholarships from nonprofits and/or state-supported vouchers or savings accounts. The funding available to families is usually much stronger than families can claim with simple tax credits and deductions. This School Choice in America Dashboard can help you navigate all the options.
Before- and After-School Care Deduction
The Child and Dependent Care Tax Credit makes it possible for families to get tax relief for their before-school and after-school care expenses. A family might qualify for this credit if their child attends a care program before or after school, so the parent(s) can work or look for work. The IRS says that if your children are older than 13, they don’t require supervised care when you’re unavailable, so only parents of kids under 13 are eligible.
The credit applies to public and private programs, but you must separate the before- and after-school care payments from any private tuition payments. You might have to ask your private school to help with that.
The expense caps are $3,000 for one qualifying child or $6,000 for two or more qualifying children.
Because navigating tax codes is complicated, we encourage all of our readers to consult with a financial expert before moving forward with any of the programs featured in this post. The information contained in this article should not be considered as a substitute for professional tax advice.
