Do homeschool teachers get the Educators Expense deduction?

IRS

I am frequently, “Are there any tax breaks for homeschooling parents?”  My usual reply is, “No; there are no tax credits or deductions for homeschool expenses at the federal level.” There are tax breaks offered by some states that I discuss in another blog post.

But here’s a bit of a new twist on the question from a homeschool mother.

I spoke with an IRS representative just today about an educator’s expense tax break.
The IRS rep stated that IRS laws specifically prohibit homeschoolers from getting up to $250 credit for educational items purchased. However, he stated congressional law overrides IRS law and that congressional law requires teachers work in a school as defined by state law. In our home state, Kentucky, we are considered private schools. The IRS rep suggested I give the credit a go next year but be prepared for an audit. Can you shed some light on the situation?

She is referring to the Educators Expense deduction of up to $250 in unreimbursed expenses.

The IRS guidelines say to be an eligible educator:

“You work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.”

To work means to get paid (to the IRS, not to all of us SAHMs!).  Homeschool parents are not employees of a school.  We do not get paid; we do not get a W-2.  I attended a tax workshop where we were told that the IRS will check for a W-2 from a school if a taxpayer takes the Educator Expense deduction. Homeschoolers would not have a W-2 from a school, even if your state classifies your homeschool as a private school.

The intention of the tax deduction was to move the deduction from the Schedule A (Itemized deductions) Miscellaneous Deductions where it was subject to a 2% of Adjusted Gross Income limit (meaning anything over 2% of your AGI could be deducted) and put the deduction on the front page of the 1040, so even teachers who don’t itemize deductions can take advantage of the $250 deduction.

The Educator Expense Deduction was nearly eliminated in 2006, but received an extension.  I predict the deduction will not be around for much longer.  IMHO, it was President Bush’s attempt to get a few votes from paid teachers.

So in short, I do not take the Educators Expense deduction, nor recommend that other homeschool families take the deduction.  The IRS rep was right, be prepared for an audit.  But without a W-2 from a school, you won’t win.

HTH,
Carol

P.S.  Here are my required “lawyer” words:
Internal Revenue Service Circular 230 Disclosure:  Advice relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of  avoiding penalties under the Internal Revenue Code or  promoting, marketing or recommending to another party any transaction or matter addressed herein.

Comments

  1. Good advice, Carol! I do WISH we could take the deduction though.

  2. Jay G says:

    So for Home Educating (Private School) parents can the Schooling expenses that are documented be added to the Misc. Expenses on Schedule A. Understanding that they are subject to a 2% AGI.

  3. Carol Topp says:

    Home educating expenses are personal expenses and not tax deductible, even as Miscellaneous deductions.
    Carol Topp, CPA

  4. S Kuttenkuler says:

    What a blessing Carol – thank you for the advice. I had this same question.

  5. Marcia Taylor says:

    What if you are a teacher that teaches homeschooled children that are not related to you? I am currently an elementary school teacher who has been approached by parents that want their children home schooled, but would rather have a private teacher do the instructing. How would I file taxes if I chose to go that route?

  6. Carol Topp says:

    Marcia,

    If you are hired to teach homeschooled children, then you are running a sole proprietorship business, much like a private tutor or a music teacher.
    You will file taxes on a Schedule C Profit or Loss from Business as part of your Form 1040.

    I have several blog posts advising people like you who want to offer services to homeschool parents.
    http://homeschoolcpa.com/is-it-a-homeschool-co-op-or-mary-poppins/
    http://homeschoolcpa.com/can-i-hire-a-homeschool-governess/
    http://homeschoolcpa.com/homeschooling-other-peoples-children-is-it-legal/

    Good luck!

    Carol Topp, CPA

  7. We’re in Texas where homeschooling is a private school by statute.
    What if my husband creates a legal business entity to provide education for his children and hires me at $1.00/hour to teach his children, would my teacher expenses be deductible then?

    As an aside about the legal definition of “work” – this sounds antiquated and chauvinistic. What would be the negative ramifications of redefining work in terms of product and output instead of pay?

  8. Carol Topp says:

    Babs, To be a “legal” business your husband would need a source of revenue; someone to pay him for what he will sell, i.e. a customer. Your plan does not include how your husband’s business would generate revenue. It has no paying customers!
    Also, if he paid you only $1/hour, he would be in trouble for not following the minimum wage laws.

    You can define work in terms of product and output if you wish (many companies do that when they pay for performance), but our tax system is based on dollars of income, not a measure of work output.

  9. Josh Turner says:

    Carol, The statute does not state that someone need be employed or be paid, it simply says ‘work’. It does not refer to earned income or unearned income, only an hourly requirement (900 hours). My state says homeschool is a private school as long as it satisfies certain (easy) requirements.

    I think your opinion on this is not correct as you have added to the fact pattern the statue sets up: is there somewhere where the IRS defines work as something that only applies to effort given forth that is compensated with goods or money? If so, then you may be correct, but I have not been able to find this (in my, albiet brief, google search). When making an interpretation of a word in the statute, It would be helpful (and add credibility) if you could add a citation (link?) so we can know that this decision is authoritatively set forth by agency policy or statute..

    My opinion is, If nothing else, this is an issue of equal protection under the law. Nothing requires a school teacher in a public school to spend their personal money on educational items for their students, so this is a privilege granted by statute to ‘educators’ who work in a school more than 900 hours a year, period.

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