In this episode of the Dollars and Sense Show host Carol Topp discusses tax breaks for homeschoolers.
Show Notes:
There is no federal tax credit or deduction for homeschool expenses
Some states do allow a deduction, usually on state income tax. Proposed in Ohio: Property tax deduction for homeschool expenses
Arizona, Illinois, Indiana, 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.
Links:
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. https://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:https://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:
https://a2zhomeschooling.com/laws/homeschool_laws_legalities/tax_writeoff_educational_writeoffs/
Disadvantages of tax breaks for homeschool expenses:
We have an overly complex tax system already
Fear of government regulation, proof of homeschooling, etc.
Remember tax deductions and credits just reduce the tax you pay.
Your state government is not putting cash in your hand to purchase books. You must do that first.
Then you pay a little bit less in tax via a tax deduction.
Tax breaks for parents
- Exemptions: $3,900 per person in 2013.
- Child tax credit. $1,000 per child. Ends when child turns 17, not 18! Law says child “was under age 17 at the end of the year.”
- Earned Income Credit
- Child care deduction (if working for pay)
- Educator Expense deduction (not allowed for homeschoolers because the teacher-parent is not employed by a school for 900 hours in a school year)
- There is a bill in the US House of Representatives to allow home school parents to take this deduction. HR 1850 sponsored by Rep Tom Cole, R-OK.
Education credits/deduction
- American Opportunity Credit (used to be called the Hope Credit) up to $2,500 per student. Tuition, books and equipment. First 4 years of undergraduate college.
- Lifetime Learning Credit: up to $2,000 per tax return. Tuition, books and equipment. Undergrad, graduate and courses to acquire or improve job skills.
- Tuition/fees deduction: Up to $4,000. Cannot claim tuition deduction and AOC/Lifetime for same student in same year.
- Student loan interest deduction. $2,500 deduction.
- Some states allow 529 deduction (Ohio)
College savings incentive
- 529 plans offered in many states. Known an Qualified Tuition Programs (QTP). Tax free earnings when used for tuition, books, room and board.
- Coverdell Education Saving Account (also known as Education IRA). $2,000 contribution per beneficiary per year. Tax free earnings when used for tuition, books, room and board. Can also be used for k-12 expenses.
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