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Homeschool Tax Deductions, Write-offs or Credits for 2017?

Tax Deductions and Homeschooling

This time of year I usually get several letters asking if there is any way homeschool expenses can be written off as tax deductions or credits.

Homeschools in most states cannot be run as a business nor even as a non-profit as you do not charge your own children for their education, and you provide no community service to others than your own family. Your intent is not to make a profit, which is the rule-of-thumb for the IRS regarding home businesses. It is more like a hobby or paying for piano lessons. You are not under the control of a board of directors, unless you go to a lot of trouble to form a non-profit association. You’d probably have problems being allowed to do this for a homeschool.

Late Drama Leads Home Schooling Provision to Be Stripped From Tax Bill
December 19, 2017
The House passed the tax bill with those changes earlier on Tuesday. Later in the day, however, the Senate parliamentarian ruled that allowing 529 savings to be spent on home schooling violated Senate rules for the bill, the Associated Press reported. The Senate therefore passed the bill Tuesday without the tax-advantaged savings for home schooling costs paid for out of 529 plans, following a push by Sen. Bernie Sanders, I-Vt., and Sen. Ron Wyden, D-Ore., who first highlighted the problem with the homeschooling provision.

Jeff Weston, executive director of the National Homeschool Association, said that while it’s “unfortunate” the provision was removed and it would have helped homeschooling families in the short term, in the long run, the assistance likely would have meant more government interference, like testing requirements or home visits.

No, donations of money or educational supplies to your homeschool may not be written off on the taxes of your kindly relatives.

Tax forms, taxes and homeschoolingI was asked if homeschooling could be regarded as a hobby and thus you could make some hobby deductions. This would be tough as the IRS regulations say you can only deduct up to the amount of income you make from the hobby.

Saying that, you can start ANOTHER kind of educational business, such as a tutoring service, in which case you would fall under tutoring laws and not homeschooling laws. You can start a private school, and thereby fall under THOSE laws. However, you still can’t write off any expenses but those incurred in support of paying customers. You may hire your children to do real work related to your business. Product testing and writing product reviews for your website is a real popular job!

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. IRS regulations are pretty clear that you can only write off educational expenses that apply to post-high school expenses. The IRS states:

“For purposes of the tuition and fees deduction, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses, earlier). The student must have either a high school diploma or a General Educational Development (GED) credential.

You may take a charity donation tax deduction for donations to 501(3)(C) non-profit homeschool organizations. Most state-wide homeschool associations have that designation, but check first. Most local homeschool support groups do not, but a few may.

If you donate used curriculum to a non-profit, such as your local library, and carefully record the value of the donation, you may take this as a material donation to a charitable organization. Get a receipt.

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Tax Strategies for Parents of Kids with Special Needs
If you have a child with a severe learning disability, you may qualify for valuable tax benefits. If your child has ADHD, or other physical, mental, or emotional impairment, you may also qualify for tax benefits. Because tax laws are complex, and many tax preparers often do not have occasion to use these unique tax benefits, families are at risk of losing refunds worth many thousands of dollars. The IRS allows taxpayers to file amended returns, and collect refunds for unclaimed tax benefits, retroactively up to three years.

Publication 970, Tax Benefits for Education
For use in preparing US tax Returns. New form for Returns.

Tax Credits

There are now three states which have tax credits for homeschooling: Illinois, Minnesota and Louisiana.

2015 Louisiana School Expense Deduction Worksheet
This Illinois document provides home schools the requirements for qualified education expenses. Educational Expenses for Home-Schooled Children R.S. 47:297.11 provides a deduction for educational expenses paid during the tax year for home-schooling your dependent child. In order to qualify for the deduction, you must be approved by the State Board of Elementary and Secondary Education (BESE) for home-schooling. The deduction is equal to 50 percent of the actual qualified educational expenses paid for the home-schooling per dependent, limited to $5,000. Qualified educational expenses include amounts paid for the purchase of textbooks and curricula necessary for home-schooling.

Qualifying Home School Expenses for K-12 Education Subtraction and Credit in Minnesota
Taxpayers who home school their children may have questions about which education expenses are required as part of a “normal school day” (that is, expenses commonly required and purchased for subjects normally taught in public school grades K­12). This fact sheet should help answer questions about qualifying home school expenses for the K-12 education subtraction and credit.

Deductions For School Tuition, Home School Educational Expenses, And Public School Educational Expenses
The school expense deductions are deductions from Louisiana taxable income—they are not tax credits. Taxpayers must retain all expense receipts as proof of the amounts paid. The deduction is limited to $5,000 per dependent.

If you want the same benefits in your state, you’ll have to get some grass roots support for a law like Minnesota’s or Louisiana’s. Note that the law is for ANY parent purchasing educational material for their children. I do not know exactly what constitutes “required expenses” under this law. My guess is that it is for only those items that schools require their families to purchase. It may only include materials such as pencils and paper, and not include something like a backpack. It may include a new microscope, and then again it may not. Does family membership in a local museum count? Most likely only a membership for children MIGHT count, and then, maybe such a membership is not considered a “school supply.” Only a CPA can answer these questions for you.

Is the tax credit great enough to offset the invasion into your privacy? Do you need the tax credit badly enough to tell the state what you have been buying to educate your child with? What if someone “up there” doesn’t approve of your expenditures? Just something to consider. I hear that the deduction may result in tax payers paying about $35 less in taxes. Less than the price of one good math book these days. How much is your freedom worth?

I often ask homeschoolers if maybe they don’t think they get MORE use out of some things their tax dollars go for than average families. Most will admit to being heavy users of the public library and the local and regional parks. “Carschoolers” joke about probably using up more highway taxes than most!

State Tax Deductions or Credits for Homeschooling

Deductions For School Tuition, Home School Educational Expenses, And Public School Educational Expenses in Louisiana
This statute allows an income tax deduction for educational expenses paid during the tax year by a taxpayer for home-schooling children. The deduction is for 50 percent of the actual qualified educational expenses paid for the home-schooling per dependent, limited to $5,000. Qualified educational expenses include amounts paid for the purchase of textbooks and curricula necessary for home-schooling. The total amount of the deduction may not exceed the taxpayer’s total taxable income.

H.R.1850 – Home School Equity Act for Tax Relief of 2013
Amends the Internal Revenue Code to: (1) extend through 2013 the tax deduction for expenses of elementary and secondary school teachers, and (2) expand the definition of “school” for purposes of such tax deduction to include a home school which provides elementary or secondary education if such school is treated as a home school or private school under state law. Follow bill here. Latest Action: 05/07/2013 Referred to the House Committee on Ways and Means.

Tax Shelters

Coverdell Education Savings Accounts
Coverdell ESAs have an annual contribution limit of $2,000 (compared to their predecessor’s $500) and the funds can be used not only for college costs, but also for expenses in grades K-12. Families with children in public, private and religious schools can use the accounts to pay for things like books, supplies, after-school programs, tuition, tutoring, and even home computers. Although contributions to an ESA are not tax deductible (they weren’t for an education IRA either), the interest that accumulates is tax free, and withdrawals are not subject to taxation if used for qualified expenses. A noteworthy component of the program allows third parties, including relatives, friends, corporations, unions, and organizations, to contribute to an individual’s ESA.

Other Homeschool Sites on this Topic

Are Homeschooling Expenses Deductible?
The short answer is: No. Find out which education-related tax deductions and credits are not available to people who homeschool their children. You may NOT take the Educator Expense deduction as you are not a paid teacher. Tuition and Fees deduction are only for post-secondary expenses. You are not a Charity, but you may deduct contributions to homeschool services that are 501(c)(3) nonprofits. You may not take a Tax Credit. Here are tax breaks for parents.

Ask The Taxgirl: Do Homeschooling Expenses Qualify As An Educator Expense?
What this all means is that that the deduction is intended to reimburse paid employees for out of pocket expenses.

Dear Uncle CHiN
Can’t we deduct the expenses of homeschooling from our income taxes somehow? Signed, Wrung-out Taxpayer.

Homeschool CPA
The simple answer is “No; there are no tax credits for homeschool expenses from the federal government.” The longer answer is “Maybe, depending on what state you live in.”

Homeschool Tax Credits: Pro and Con
VaHomeschoolers’ annual survey shows that Virginia’s home educators are divided on the subject of homeschool tax credits. Read the points below, and decide whether you are pro or con.

Why Tax Credits Are Wrong for Homeschoolers
The first problem with accepting tax credits is that it necessarily means that the government must define who is a home educator and who is not. Do you really want that?

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5 Responses to Homeschool Tax Deductions, Write-offs or Credits for 2017?

  1. ChrisDadTN on August 8, 2017 at 4:43 pm

    What about the Educator expenses deduction? The FedEx law says the person must be an instructor of primary or secondary education as determined by the state. In the state of Tennessee and elsewhere, a home school is recognized by the state…therefore the parent should qualify to itemize up to $250 of teaching materials…right?

    Topic 458 – Educator Expense Deduction

    If you’re an eligible educator, you can deduct up to $250 ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each) of unreimbursed trade or business expenses. Qualified expenses are amounts you paid or incurred for participation in professional development courses, books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. For courses in health or physical education, the expenses for supplies must be for athletic supplies. This deduction is for expenses paid or incurred during the tax year. You claim the deduction on line 23 of Form 1040 (PDF) or line 16 of Form 1040A (PDF).

    You’re an eligible educator if, for the tax year you’re a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

    • Ann Zeise on August 9, 2017 at 8:29 am

      FedEx, the shipping company, has nothing to do with Federal laws, other than those which they need to obey for their shipping business, of course.

      If you are an instructor BEING PAID to for 900 hours of instruction a year to teach, then you may make the deduction. As most homeschool parents are not being paid by an outside source to educate their own children, this deduction is not an option.

      Someone hired as a tutor for 900+ hours a year would be able to take this deduction.

      See here: https://www.irs.gov/publications/p529
      “Qualified expenses don’t include expenses for home schooling or for nonathletic supplies for courses in health or physical education.”

  2. William on April 1, 2016 at 6:58 am

    The story about Illinois Tax Credits and Illinois Department of Revenue Publication 119 do not agree. The State limits the tax deduction to 25 percent of your student’s qualified education expenses above $250. With an annual credit limit of $500 per year. Taxpayer must attach Illinois Schedule ICR and ED to claim the credit along with receipts. WHJ-CPA

    • Ann Zeise on April 2, 2016 at 5:43 pm

      I can’t find any resource online that agrees with you. Can you please give me a link to any official site that backs up your claim that the deduction is what you say, rather than the 2015 form I link to which doesn’t say what you say.

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