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What Homeschooling Expenses are Deductible? About Claiming Homeschool Expenses on Federal and State Taxes

This article provides a comprehensive listing of homeschool expenses and explains which ones qualify for federal and state income tax breaks.

Homeschool Expenses

Homeschooling is a lot of things, but free is not one of them. According to Homefires: The Journal of Homeschooling Online, the average family that responded to its 1995 survey on the annual cost of homeschooling a child in the San Francisco Bay Area reported spending $3,197. These expenses include amounts spent on establishing a homeschool, homeschooling related memberships and publications, homeschooling conferences, curricula, textbooks, workbooks, software, audio cassettes, videos, enrichment classes, memberships to museums and other cultural institutions, field trips, school supplies, record-keeping materials, transportation, reference books, educational magazines, classroom furnishings, and other miscellaneous materials, equipment and supplies. Costs could rise even more if families have to make major homeschooling-related purchases, such as computers, or if they are homeschooling children with disabilities who need the services of therapists and special education consultants.

With all these costs accumulating homeschoolers wonder, exactly what homeschooling expenses are deductible?

Federal Tax Breaks

While there are no federal tax deductions or credits set aside for homeschoolers per se, there are provisions under federal tax law that allow homeschoolers to relieve some of their federal tax burden. One such provision allows you to deduct the costs of certain special education expenses (e.g., specialized tutoring or tuition to pay for specialized instruction) and therapy as a medical expense. This tax deduction is available to those who homeschool, as well as those who do not. For more information, consult IRS Publication 502.

Another federal tax break available to homeschoolers is the charitable contributions deduction. When homeschoolers make cash deductions to nonprofit homeschooling associations or donate used curricula and other materials to nonprofit homeschool organizations, libraries or other such organizations, they can deduct the value of their deduction on their federal taxes on Schedule A. If you plan to deduct charitable contributions, keep thorough records. For additional information, read IRS Publication 526.

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Federal Tax-Advantaged Education Savings

A Coverdell Education Savings Accounts (ESA) can be a tremendous asset for a homeschooling family. The accounts allow beneficiaries to receive annual contributions of up to $2,000. Earnings on the accounts are federal tax-free, as are distributions that don't exceed the beneficiary's adjusted qualified education expenses for the year. Qualified expenses include tuition and fees, academic tutoring, special needs services, books, supplies and equipment. Computer technology, equipment and Internet access are also considered qualified educational expenses if they are to be used during the beneficiary's elementary and secondary school years. Read IRS Publication 970 for more information.

State Tax Credits

Currently, three states—Illinois, Louisiana and Minnesota—allow homeschoolers to take a credit on their state income taxes. Illinois allows homeschoolers to take a credit of 25 percent of a student's qualified expenses after the first $250. The maximum credit for taxpayers is $500 regardless of how many qualifying students they have. Qualifying expenses include tuition, lab fees, book and curriculum rental fees, and the cost of student workbooks and teacher grade books. Louisiana homeschoolers can take a deduction of 50 percent of the costs paid per dependent up to a limit of $5,000 for certain expenses, such as the purchase of curricula and textbooks. Minnesota homeschoolers can take a credit of up to 75 percent of their qualifying education expenses, which encompass all costs incurred as part of a "normal school day." Taxpayers may also qualify for a subtraction on their state income taxes for tuition and fees they pay for instruction on behalf of their homeschooled children.

References

"Education Tax Credits," http://www.hslda.org/docs/nche/000010/200504150.asp

Homefires: The Journal of Homeschooling Online, http://www.homefires.com/articles/costs.asp

Illinois Department of Revenue Publication 119, http://www.revenue.state.il.us/Publications/Pubs/PUB-119.PDF

Internal Revenue Service Publication 502, http://www.irs.gov/pub/irs-pdf/p502.pdf

Internal Revenue Service Publication 526, http://www.irs.gov/pub/irs-pdf/p526.pdf

Internal Revenue Service Publication 970, http://www.irs.gov/pub/irs-pdf/p970.pdf

Louisiana Department of Revenue "Deduction for School Tuition, Home School Educational Expenses, and Public School Educational Expenses," http://www.revenue.louisiana.gov/sections/individual/SchoolExpenseDeduction.aspx

Minnesota K-12 Education Credit and Substraction: Home Schooling, http://taxes.state.mn.us/individ/pages/credits_subtractions_additions_education_credits_subtractions_educ_home_schooling.aspx