Tax Deductions and Tax Breaks for Private Schools

Can you deduct private school tuition?

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Maybe you've heard that your neighbor claims a tax credit for what she spends on her child's after-school program, or your cousin might get all sorts of tax breaks because his older teen is enrolled at the local community college. You send your child to a private school and it's somewhat costly, so you can surely claim your own tax break—right?

There is some help available for private elementary and high school costs, but it's unfortunately limited and the rules are tricky. The 2018 tax legislation did open up one new door, however.

Education Expenses

K-12 private school education expenses aren't tax deductible at the federal level, at least not when paid directly by parents. Educational expenses are tax deductible at the federal level for post-secondary and other types of costs, however.

This would include community colleges, universities, trade or vocational schools, and pretty much any other accredited education program following high school.

The key words here are "following high school." Grade school and high school tuition and expenses don't count...with one exception.

Private School Costs for Special Needs

You can deduct private K-12 tuition for children with special needs if such schooling is medically or therapeutically required. A doctor must certify that this is the case, and you'll have to itemize to claim the deduction.

It falls under the itemized deduction for medical expenses. Unfortunately, you can only deduct the portion of your medical expenses that exceeds 10% of your adjusted gross income (AGI) in 2019. This is an increase from 7.5% of your AGI in 2018.

The Deduction for Before- and After-School Care 

This one falls under the umbrella of the Child and Dependent Care Tax Credit.

You might qualify for the Child and Dependent Care Tax Credit if your child attends a before- or after-school care program so you can work or look for work. If you're married, your spouse must also work or be looking for work.

Your child must be younger than age 13—the IRS takes the position that children older than this don't require supervised care when you're unavailable. The credit applies to both private and public school programs, but you must separate the cost of the care from any tuition you pay if you send your child to private school. The school should be able to help you with this.

The amount of the credit varies per taxpayer and is calculated on up to $3,000 in total work-related child care expenses for one child, or $6,000 for two or more children. If you spend $1,500 for the after-school care program and $500 for summer camp so you can work or look for work, you can claim a percentage of these costs as a tax credit.

The amount of the percentage depends on your AGI, and it tops out at 35%.

A Big Change With 529 Savings Plans

529 savings plans have historically provided help with private post-secondary school expenses. A 529 plan, also called a "qualified tuition plan," works similarly to an IRA, but for educational purposes.

There are two types of plans: prepaid tuition plans and education savings plans. Every state sponsors at least one of them. They're established and designated for a beneficiary's education costs.

Contributions to the plan aren't tax deductible at the federal level, but their growth is tax-free as long as your beneficiary uses the money for educational purposes. The Tax Cuts and Jobs Act (TCJA) changed the usual rules beginning in 2018. You can now establish and use these plans for K-12 education costs as well.

Parents and anyone who would like to contribute to a 529 plan can do so with no limit up to the plan’s maximum capacity.

Contributors should be cautious about the size of their gifts, however. The federal gift tax exemption is $15,000 per recipient per year as of 2019. Anyone who contributes more than $15,000 can be subject to the federal gift tax for the balance over this exclusion threshold.

The Coverdell Education Savings Account

Coverdell Education Savings Accounts were introduced by the Taxpayer Relief Act of 1997. This isn't exactly a tax break for paying tuition, but it's a tax break all the same. It applies not only to post-secondary educational costs but to high school and elementary school expenses as well.

You can contribute up to $2,000 a year to a Coverdell ESA. Your contributions aren't tax deductible, but your money grows tax-free while it's in the account. You can withdraw all of it—both contributions and accumulated interest—for tuition and other qualified expenses without paying any tax on the capital gains.

As of 2019, your modified adjusted gross income (MAGI) must be less than $110,000 to qualify for this tax break if you're single. The limit doubles if you're married and filing a joint return. Most taxpayers’ MAGIs are the same as their adjusted gross incomes, but you'll want to check with a tax professional to be sure.

Note: Tax laws change annually for federal and state filings. You should always consult with a tax professional for the most up-to-date advice. The information contained in this article is not intended as tax advice and is not a substitute for tax advice.

Article Sources

  1. IRS. "Topic No. 313 Qualified Tuition Programs (QTPs)." Accessed Jan. 14, 2020.

  2. IRS. "Tax Benefits for Education: Information Center." Accessed Jan. 14, 2020.

  3. IRS. "2018 Publication 970 Tax Benefits for Education," Page 41. Accessed Jan. 14, 2020.

  4. IRS. "Publication 907 (2018), Tax Highlights for Persons With Disabilities." Accessed Jan. 14, 2020.

  5. IRS. "Can I Claim Medical Expenses on My Taxes?" Accessed Jan. 14, 2020.

  6. IRS. "Topic No. 602 Child and Dependent Care Credit." Accessed Jan. 14, 2020.

  7. Congressional Research Service. "Child and Dependent Care Tax Benefits: How They Work and Who Receives Them," Page 6. Accessed Jan. 14, 2020.

  8. U.S. Securities and Exchange Commission. "An Introduction to 529 Plans." Accessed Jan. 14, 2020.

  9. "H.R.2014 - Taxpayer Relief Act of 1997." Accessed Jan. 14, 2020.

  10. IRS. "Coverdell Education Savings Accounts Can Make Education Costs Less Taxing." Accessed Jan. 14, 2020.

  11. IRS. "Topic No. 310 Coverdell Education Savings Accounts." Accessed Jan. 14, 2020.

  12. IRS. "Tax Benefits for Education," Page 39. Accessed Jan. 14, 2020.