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Tax Tips When Sending Kids to Private or Public Schools

Updated for Tax Year 2017


OVERVIEW

The decision to send your child to a public or private school is a personal choice. If you settle on private K-12 schooling, there are a few benefits that can help to reduce your federal tax liability and, in some states, your state tax as well. You’ll really see a tax benefit, though, when you send your child to college. Both private and public post-secondary educations come with some generous tax breaks for your family to help make education more affordable.


 

The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.

Tax Breaks for Private K-12 Schooling

Girl doing chemistry in science class

In most circumstances, you won’t get a significant break on your taxes by sending your kids to a private school from kindergarten to grade 12.

  • The Internal Revenue Service doesn’t allow you to deduct private school tuition to lower your federal tax liability.
  • But in some states, like Arizona, you can claim private school tuition to help reduce the amount of state tax you’ll owe.

If your child is attending private school for special needs, however, 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 10% of your adjusted gross income.

Coverdell Education Savings Accounts

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 must be used to cover qualified education expenses, like tuition, textbooks, or other supplies required by your child’s program.

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 her Coverdell account, you'd only be able to contribute $1,000.

Your income might also reduce your contribution limits. If your 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. 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.

Tax Breaks on Post-Secondary Education

You’ll get the majority of potential tax breaks if your children attend private or public colleges or universities. You—or your child—can use the education tax credits to deduct the costs of tuition fees, books, and other required supplies that you pay to a qualified education institution.

Also, the American Opportunity Tax Credit and Lifetime Learning Credit can help lower your tax liability by up to $2,500 or $2,000, respectively.

You may also be able to avoid paying tax on some or all of your scholarship money. In many cases, scholarship funds used for qualified education expenses don’t count toward taxable income, which means they won’t increase your tax liability for the year.

Other Potential Tax Deductions

If your school offers child care services outside of school hours, such as daycare before and after school for the convenience for working parents, you may be able to deduct some of the cost of that care via the Child and Dependent Care Credit. To qualify, you must pay child care costs separate from tuition and other expenses. You can claim the credit for up to $3,000 for care for one child or $6,000 for care for two or more children. The credit can be up to 35% of your qualifying expenses.

Remember, with TurboTax, we’ll ask you simple questions and fill out the right tax forms for you to maximize your tax deductions.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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