A Tax Write-Off?
Dateline: 3/14/01 Updated 1/8/08
By Ann Zeise
This time of year I usually get several letters asking if
there is any way homeschool expenses can be written off on taxes.
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.
No, donations of money or educational supplies to your homeschool
may not be written off on the taxes of your kindly relatives.
I 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 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(C) non-profit homeschool organizations.
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.
Tax Benefits for Parents of Children with Learning Disabilities
If you have a child with a severe learning disability, you may qualify for valuable tax benefits. If your child has AD/HD, 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 (2007), Tax Benefits for Education
For use in preparing 2007 Returns
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.
There are two states which have tax credits for homeschooling:
Illinois and Minnesota.
Publication
119, Education Expense Credit General Rules and Requirements
for Home Schools
This Illinois document provides home schools the requirements
for qualified education expenses.
Qualifying
expenses for the education credit and subtraction 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.
If you want the same benefits in your state, you'll have to
get some grass roots support for a law like Minnesota'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!
Other Homeschool Sites on this
Topic
Dear
Uncle CHiN
Can't we deduct the expenses of homeschooling from our income
taxes somehow? Signed, Wrung-out Taxpayer.
Home
Education Tax Credit? No, Thanks!
While the idea of a tax deduction for homeschool materials may
be appealing, consider that any government plan comes with requirements
and restrictions. By Shay Seaborne.
Homeschool CPA
Helping Homeschool organizations obtain non-profit status.
Carol Topp has several articles about managing growing groups,
mission statements, budgeting, by laws, applying for 501c3 tax
exempt status, etc. As a homeschooling mother and Certified Public
Accountant (CPA) she is blending her skills, education and experience
to help other homeschoolers manage their organizations.
Tax
Credits: Carrots, Sticks, and Strings
The Kasemans explore education tax credits for homeschoolers
- and explain why they're not what they seem to be. By Larry
& Susan Kaseman - HEM N/D 05
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