Where you send your child to school is often a personal choice. If you choose private K-12 schooling, some federal tax benefits can help to reduce your cost.
• Under federal tax law, private school tuition isn’t tax deductible unless your child is attending a private school for special needs.
• If a physician’s referral proves that your child requires access to special needs private education, the expenses could qualify as deductible medical expenses.
• While you can’t deduct private school tuition directly, you can avoid paying taxes on the earnings from a Coverdell Education Savings Account (ESA) if the funds are used to cover qualified K through 12th grade education expenses.
• You can also make tax-free withdrawals from a Qualified Tuition Plan, also known as a 529 Plan, if these funds are used to pay for tuition (not for books or other educational expenses).
Can you get a tax break for sending your kids to school?
Sending your kids to public school from kindergarten to 12th grade generally won’t result in any tax breaks for you. Likewise, in most circumstances, you won’t get a significant break on your taxes by sending your kids to private schools either.
Federal tax law doesn’t allow you to deduct private school tuition to lower your federal tax liability.
If your child is attending a private school for special needs, you may be able to get a tax break on your K-12 private school tuition. To qualify, you’ll need a physician’s referral proving that your child requires access to specialized private education. And, if your child qualifies, you may also be able to deduct the cost of special tutoring or training in addition to tuition.
- To claim this deduction, you must itemize rather than choosing the Standard Deduction.
- The expenses would need to qualify as deductible medical expenses that are reduced by 7.5% of your adjusted gross income (AGI).
Otherwise, you won’t have a significant opportunity to claim tax savings by sending your children to a private school.
What tax breaks are available to pay for education costs?
Unfortunately, paying for private school tuition is generally not tax-deductible on your federal income tax return. On the other hand, you do have access to two types of accounts that can lower the cost of paying for qualified education expenses.
Tax-friendly accounts to pay qualified education expenses
You can use two tax-friendly accounts to assist in paying for qualified education expenses: the Coverdell Education Savings Account (ESA) and the Qualified Tuition Plan also known as a 529 Plan. These accounts allow you to invest money to pay for certain education expenses for both K through 12th grade and also for college or other qualifying education expenses.
Coverdell Education Savings Account (ESA)
While you can’t generally use private school tuition to directly reduce your tax liability, the government may offer some tax relief in the form of Coverdell Education Savings Accounts, or ESAs. These accounts allow you to invest your education savings without paying tax on the earnings. ESA funds can be used to cover qualified K through 12th grade education expenses, like
- Textbooks, or
- Other supplies required by your child’s program
Each year, up to $10,000 per student can be withdrawn tax-free from these accounts to pay for these expenses. The tax benefits of contributing to a Coverdell ESA are capped—contributions for each beneficiary are limited to $2,000 a year. For example, if your child’s grandparents contribute $1,000 to your child’s Coverdell account, you'd only be able to contribute an additional $1,000 yourself for the year.
Your income might also reduce your contribution limits.
- If your 2022 modified adjusted gross income is above $95,000 (or $190,000 if you're filing jointly), you'll notice a gradual reduction in your contribution limits until you reach $190,000 ($210,000 filing jointly) where you are no longer able to make a contribution.
- If you're eligible, you can contribute to the account until your child turns 18, or beyond age 18 if your child has special needs.
TurboTax Tip: Two popular education credits—the American Opportunity Tax Credit and the Lifetime Learning Credit—can only be used to pay for the cost of higher education. They cannot be used to offset the costs related to K-12 education.
529 Education Savings Plans
Like the Coverdell accounts explained above you can also use savings from 529 plans to pay for K through 12th grade tuition. Each year, up to $10,000 per student can be withdrawn tax-free from these accounts. However, unlike Coverdell accounts, to retain the tax free benefit, the 529 money can only be used for tuition and not for textbooks, computers, or other fees or activities.
These two valuable educational savings accounts can provide tax benefits for after-tax money you invest. But unlike using these accounts to save for college, you won’t have as much time for the investments to grow in value. As a result, your benefits won’t likely be as great for the money you need sooner. Still, taking advantage of any tax savings you can find can be useful.
Are tax credits available for attending school?
Dependent care credit for attending before-school and after-school care
The Child and Dependent Care Credit provides a tax break for parents who pay for the cost of child care. While the credit targets working parents or guardians, if you were a full-time student or unemployed for part of the year, you may also qualify to claim the Child and Dependent Care Credit.
If you paid an after-school program, daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit on your 2022 taxes equal to as much as 35% of:
- up to $3,000 of qualifying expenses (for a maximum credit of $1,050) for one child or dependent, or
- up to $6,000 of qualifying (for a maximum credit of $2,100) for two or more children or dependents.
For example, for tax year 2022, a taxpayer with one qualifying person, $3,000 in qualifying expenses and an AGI of $60,000 would qualify for a nonrefundable credit of approximately $600 (20% x $3,000).
American Opportunity Tax Credit
The American Opportunity Tax Credit is a tax credit available to pay for the cost of attending college for students. The credit generally offers greater tax savings than other education-related tax benefits since it reduces the tax you owe on a dollar-for-dollar basis and a portion of it can be refundable. However, you can’t use this credit to offset costs related to K-12 education.
Lifetime Learning Credit
The Lifetime Learning Credit reduces your tax bill on a dollar-for-dollar basis for a portion of the tuition, fees and other qualifying expenses you pay for yourself, a spouse or a dependent to enroll in a post-secondary school. However, none of the Lifetime Learning Credit is refundable. Like the American Opportunity Credit, you can’t use this credit to lower the cost of private school K-12 education.
What is a dependent care flexible spending account?
A dependent care flexible spending account (DCFSA) is a pre-tax account that can be used to pay for eligible dependent care expenses. Qualifying dependents include children under the age of 13, a disabled spouse, or an older parent in eldercare. Generally, you’ll need to access this account through an employer that offers this as a benefit to employees. While parents can’t use these funds to pay for K-12 public or private school tuition, they can use this pre-tax money to help pay for before-school and after-school care.
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