Is private school tuition tax deductible?

Svetlana November 11 2021

You will find the answer in this article. Also, we'll shed light on what solutions you can opt for to get tax relief. 

The law classifies private elementary and secondary schools as either a charity or a business. If you plan on getting tax deductible by paying your tuition, you should know whether your school is classified as a non-profit entity or if they have year-round education programs that can be considered more of a business institution.

You also need to know if their main function is religious indoctrination because only certain types of organizations qualify for deductions.

Follow this article to find out what qualifies you for tax deductions on college tuition from accredited universities that provide an eligible service.

Is private school tuition tax deductible? 

The short answer is a no. There isn't any direct tax deduction offered to parents for private school tuition. 

The long answer is, there was a rumor spread in 2018 after the changes made in the tax law. Parents thought they would get a tax deduction if their children studied in a private school. According to this logic, all parents could send their children of all ages to private schools expecting a deduction in their taxes. Hence, it meant paying the Federal government less money.

This means that paying for the private tuition of your child wouldn't allow you to get a reduction in taxes. But, thankfully, there are some ways to help you get tax relief.

Ways to Pay for Your Child’s Private School Tuition

Identify tuition as a childcare expense  

You can get a deduction of the cost of nursery school or preschool on the childcare tax credit. The Internal Revenue Service (IRS) does not consider grades from and above kindergarten in childcare. So, you can get tax relief on before and after-school programs, regardless of the grade level.   

You can do this by filling the IRS Form 2441 and calculating the amount to deduct from your taxes. You will have to consider a daycare or service provider as a qualified child care provider if the total cost of tuition is over $5000 for a single child.

If you are paying private school tuition on behalf of more than one child, you need to fill Form 8863 and submit it along with Form 1040. In other words, you'll need to know how much tax relief you can claim as childcare expenses. 

Special needs private school tuition is exempt 

If your child needs special care due to disability, according to a pediatric, then you can get a private tuition tax deduction. In reality, it is a medical expense rather than an educational one. So, the IRS would allow parents to take private school tuition as a tax deduction.

You can claim a tuition tax deduction of up to $17500 for two or more children in the same year. This is because private school tuition for special needs children is an above-the-line deduction. So, you don't have to itemize your deductions on Schedule A. 

The best part? It doesn't matter what grade level your child is at in the school!  If you are paying for a third grader's private tuition, then there will be no problem in claiming it. You can put "Special needs" next to your reasons for exemption when filing Form 8917.

Migrate to those states that allow private school tuition as tax deductions 

Many states allow tax deductions to certain organizations. These organizations provide financial help to students in the form of scholarships. This is up to $5000 in some states. You can then use this for paying for your child's private school tuition.

Students enrolled in private schools, K-12 and higher take advantage of this help. 

These states include:

  • Indiana
  • Florida 
  • Alabama 
  • Iowa
  • Georgia 
  • Arizona 
  • Kansas 
  • Oklahoma 
  • Louisiana
  • Rhode Island 
  • New Hampshire 
  • Pennsylvania
  • South Carolina 
  • Virginia 

For example, North Carolina State Education Assistance Authority (NCSEAA) provides up to $4000 scholarship. This is because the state allows the parents of children to take tax deductions on their contributions. Moreover, if you donate over $250 to an educational organization, you can reduce your taxable income by $1000 .

Another example is Alabama College and Career Ready Scholarship (ACCS). The law says that any parent who donates more than 50% of his/her child’s education expenses would be eligible for a deduction in taxes. All these scholarships are worth nearly $5700 per child. So, even if you are paying full tuition fees, you can take tax reductions for the same.

The only requirement is that you have to pay these in installments in order to get a deduction in taxes. The deductibility of your private school tuition will depend on the local laws of each state. The reason is simple: Each state has its own education policy and rules when it comes to tax deductions. 

These states might not completely take away your tax burden, but they make private education affordable. You will receive financial help in the form of scholarships. Although, you won't get any tax deduction as a personal expense. 

If your kid has special educational needs and is attending a private K-12 school because of it, you may be able to receive a tax break on the tuition. The exemption requires a medical declaration. Tuition, training, and tutoring expenses are deductible under certain circumstances.

Post-secondary private tuition tax deduction

You might take out a loan for your child who is an undergraduate private school student. If so, you can claim a deduction for this as well. This deduction is called the tuition and fees deduction .

Getting a tax deduction on the student loan interest is an advantage you can have if you: 

  • Make less than $80,000 per year as a single tax filer or less than $160,000 for a married couple. 
  • Have paid at least $600 in interest on student loans for the past year. 

This private school tuition tax deduction must be claimed by those whose modified adjusted gross income (MAGI) is $80000 or less. The MAGI limit shoots up to $160,000 if your child is either blind or enrolled in higher education.

This deduction phase-out starts from $50,000 and reaches the cap of $65000 at around $602000 in MAGI.  Just like the other deductions: You will need form 8917 to claim this deduction. You will also need to fill Form 1040 and attach Form 8917 with it.

Making payments to K-12 programs - credit for private school tuition

If you want to know more about the rules of claiming private school tuition tax deductions, it is best that you read through Publication 970. It gives detailed information on how the tax law applies to American students enrolled in private schools. This can be contrasted with public schools parents who get their own set of benefits when it comes to taxes.

Being able to claim a deduction for your child’s post-high-school education expenses takes out some burden off your shoulders. When you fill Form 8917, make sure that you list down all the tuition fees that were paid during last year. Also, if there is anything extra that has been spent on books and supplies, include them as well.

You must remember that qualified expenses do not include housing, transportation, or food. They only comprise tuition. Also, you may receive a maximal annual credit of $2,500 per eligible student.  This is only to be claimed by those who file their tax returns as single or married filing separately.

If you are ahead of household, the phase-out range for this credit lies between $80,000 and $120,000. This means that if you make more than $120,000 per year as a head of household.

Savings accounts can help deduct taxes on private school tuition 

Coverdell Education Savings Account (ESA) and 529 Education Savings plan both help you to save taxes. If you want to claim a deduction for your child’s private school tuition. Then, the 529 plan seems like the best option for you because of its tax benefits and flexibility.

The ESA offers unlimited saving whereas, 529 has a limit on contributions. You can transfer and withdraw funds from an ESA without any penalty or tax implications. ESAs only require distributions when it comes to funding post-secondary education.

529 plans help reduce taxes by investing in stocks, bonds, mutual funds, ETFs, etc. You have complete control over your savings account with regards to choosing investments, changing beneficiaries if needed. There are no income restrictions attached with the use of this plan so anyone can participate in it regardless of their age or income level.

529 plans are available in every state of the country and anyone can invest in them. You can open this plan along with your child's account or do it later. If you are confused about opening an ESA, 529 plan, or both of them for your child’s future education expenses. Then, talk to a professional advisor who will be able to explain all the pros and cons of each program.

Many people cannot afford private school tuition because they have many expenses they have to cover. Tax deductions can help parents cover their children’s tuition fees more easily especially when funds are tight.

As you deposit money in these accounts to pay for your child's private school or college, you can get tax deductions. There's a limit as to how much you can deposit and withdraw money without incurring taxes. Yet, it helps you to afford private education for your children.  

Conclusion 

You might not get any direct tax deductions on private tuition from the federal government. But you can always look for indirect means to save taxes on private schooling.  Use all the tips mentioned above to save tax money. The more you save from your taxes, the more you can invest in your children’s future.

You can talk to a Certified Public Accountant or a financial advisor as well for additional advice on taxes and other benefits that you might be eligible for.