How to report income earned from teaching at a homeschool co-op

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Hi Carol. Thank you for all the help you have already given our homeschool community!
As a teacher at a homeschool co-op that allows teachers to charge the parents $45 per student, how would I report any net income on my income tax return? Payments are made directly to me as the teacher.

Best regards, Lynn (New York)

Lynn,

You report all your income and all your expenses from teaching at a homeschool co-op on a Schedule C or the shorter form Schedule C-EZ as part of your federal Form 1040.
The net amount is carried onto page one of your 1040 (line 12 Business income) and added to other income from W-2s etc.

If you made more than $400 in net income (profit) you will also have to fill in a Schedule SE and pay Self-employment tax (it’s the same as Social Security and Medicare taxes) on Line 56.

Hope that helps!

Carol Topp, CPA

Any tax breaks for homeschooling in 2013?

cutting_taxes_green8732

Tax season hasn’t even started, but my website stats tell me that homeschooling parents are already wondering if there are any tax breaks for homeschooling, based on my previous blog post, Any Tax Breaks for Homeschoolers?

 

There are no tax credits for homeschool expenses from the federal government, but there may be tax deductions on your state income tax depending on what state you live in.

Several states have an educational tax credit.

Arizona, Illinois, Iowa, Louisiana and Minnesota and all have some sort of tax break for individuals. The credit is available to any public or private school student, so it is not unique to homeschoolers.

Florida, Indiana, New Hampshire and Pennsylvania offer businesses a tax credit if they sponsor a scholarship.

This website has a comparison of state programs that offer a tax credits for educational expenses or for a donation to a scholarship fund. It was last updated in September 2011. http://www.house.leg.state.mn.us/hrd/pubs/educcred.pdf

 

Home School Legal Defense Association has an explanation of some states’ tax breaks or credits:http://www.hslda.org/docs/nche/000010/200504150.asp

Ann Zeise of A to Z Home’s Cool has a great, detailed and lengthy post of tax write-offs for homeschoolers:

http://a2zhomeschooling.com/laws/homeschool_laws_legalities/tax_writeoff_educational_writeoffs/

Sorry I don’t have happier news, but many homeschoolers fear that a tax credit might come with strings attached such as reporting private information and record keeping that they would not care for. They prefer to homeschool in freedom and pay their own way in full.

What do you think?

Carol Topp, CPA

 

Can a teacher work off her homeschool co-op tuition by teaching?

Cover Money Mgmt HS Org
Carol,
Some of our paid teachers who have kids in our homeschool program still owe our group money. Can we just reduce their salary to reflect their net debt to us?
For example, one of our teachers will make $1000 for teaching next semester, but she will owe us $1,588 for all of her kids’ classes. Can I just bill her for $588 and call it a day?
Another teacher might make $2,000 and owe $,1000. Can we just offer a salary of $1,000?

Kay B in IL

 

Kay,

Oh I wish things were as simple as you describe!

Unfortunately for the teachers you pay, you cannot simply net what they owe you with what you owe them. The reason has to do with taxes. Earned income from teaching is taxable income, but tuition the teacher pays to your co-op is not a tax deduction. 🙁

In my latest book, Money Management in a Homeschool Organization, I address this issue. Here’s what I wrote:

I heard of a homeschool leader who let parents work off their tuition by teaching classes as independent contractors. One morning she announced to her teachers, “You all just got paid today!” but no paychecks were given out because they still owed tuition.

Sorry, but it doesn’t work that way.

Being paid for rendering services is one transaction (earning taxable income). Paying tuition (which is a personal expense like food or clothing and not tax deductible) is another transaction. The two do not negate each other.

The correct method would be for the homeschool group to pay the independent contractor teachers with paychecks and then they pay their tuition fee as a separate transaction.

Why is it so important to separate the two transactions?

It has to do with taxes. The teachers needed to report the income they earned on their tax return at the end of the year. Tuition for their child’s homeschool class is not a tax deduction, so they should not be seen as canceling out.

Or the homeschool group could hire teachers as employees and offer free or reduced tuition as a tax-free employee benefit.

Alternately, in a nonprofit organization, a volunteer can be given free or reduced tuition as a (tax-free) benefit in appreciation for their volunteer efforts.

If you’d like more information on managing the money in your homeschool group, order a copy of Money Management in a Homeschool Organization.

Carol Topp, CPA

Can you set up homeschooling as a business and get tax deductions?

cutting_taxes_green8732

Hi Carol,

I have been involved in financial planning for 25 years and own my business. My question is concerning tax deductions that could be available for homeschooling. What are some of the possibilities?

I would assume that a person could set up a home school as a business but that would involve certain steps; what are they?  Would tax deductions be allowed if the business was not profitable or only set up to teach their own children?  Can expenses for things like mileage, activities, food, lodging or associated training expenses count as a deduction?
Thank you.

Jim B

 

Jim,

I have been asked questions similar to yours several times.

Here’s a blog post discussing tax deductions for homeschooling expenses:
http://homeschoolcpa.com/any-tax-breaks-for-homeschoolers/

Some homeschool groups (not individual families) set up a nonprofit organization and receive 501(c)(3) or 510(c)(7) tax exempt status from the IRS. But tax exempt status is only available to an organization, not to individual families.

Tax deductions are not allowed for expenses of teaching your own children. They are considered personal expenses, like food or clothing.

You would not be successful in setting up a business to homeschool your own children because you do not have  a trade; you would have no paying customers. There would be no revenue and the IRS would disallow the expenses because they are  personal expenses, not legitimate business deductions.

So, sorry Jim, but your assumptions were wrong.

Carol Topp, CPA
HomeschoolCPA.com

 

“Incorporate yourself and write off homeschool expenses.” Really?

TaxAdviceLetters

 

Hello. I’ve been doing some research lately on how best to write of homeschool expenses in the state of Florida and came across your website. I’m hoping that you can assist me.

I’ve contacted my accountant who was able to confirm that the only way to write off homeschool expenses in Florida is to incorporate yourself.

If I go through that process, is there a site or a list of what I will be able to write off? Is it 100% of costs like curriculum and field trips? I’ve also heard that I can write off mileage related to homeschool events and even a portion of my mortgage.

I haven’t been able to find a good list anywhere that will tell me what steps I need to take and what advantages I will have once I take those steps.

Can you help or direct me to a good site that can help me?

Thank you so much for your time.

Becky C in FL

Becky,

To “incorporate yourself” you need a legitimate trade or business with a source of revenue (i.e. sales of a product or service). Paying yourself for homeschooling your own children does not count as a trade or business or revenue, so you cannot legally form a corporation.

Even if you do somehow form a corporation without revenue, your homeschool expenses are personal expenses and cannot be deducted on your corporate income tax return.

The advice you received from the accountant you found was incorrect.

Carol Topp, CPA

 

Any Tax Breaks for Homeschoolers?

handswithcash

Tax season has officially launched, so it’s time to address a question I am frequently asked,

Do homeschoolers get any tax breaks for their homeschooling expenses? Can a homeschool family deduct any of their homeschool expenses?

Sorry, but the federal government does not give a tax credits for homeschool expenses

State tax credits or deductions for homeschool expenses

But, several states have an educational tax credit. Iowa, Arizona, Minnesota and Illinois all have some sort of  tax break for individuals. The credit is available to any public or private school student, so it is not unique to homeschoolers. Florida and Pennsylvania offer businesses tax credits if they sponsor a scholarship.

This document has a chart of education tax credits and deductions by state (updated November 2008). Scroll to page 6 to see the chart.

http://www.house.leg.state.mn.us/hrd/pubs/feelaw.pdf

Home School Legal Defense Association has an explanation of some states’ tax breaks or credits:

http://www.hslda.org/docs/nche/000010/200504150.asp

Homeschool business or nonprofit as a tax dodge?

Some homeschoolers think they can start a business or a nonprofit organization of their homeschool activities and then deduct their expenses.  It doesn’t work that way. See my blog post  “Can you set up homeschooling as a business?”

Ann Zeise of A to Z Home’s Cool addresses these ideas:

You cannot contribute to your own child’s K12 education and get any tax deduction for it, no more than if you sent him to a private school and tried to write off the tuition.

Carol Topp, CPA

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