As more and more families move toward home education, the variety of individual economic challenges also increases. Many people look at the cost of purchasing curriculum, paying for online courses, and even basic supplies such as pencils, pens, paper, binders and notebooks, craft and art supplies, etc. to be daunting. The biggest question they have is: Are my homeschool expenses tax deductible?
In the United States, as of the date of this post, homeschool expenses are not tax deductible federally. Some states are adapting new legislation to allow a portion of the expenses on state income tax forms, but at the federal level that has not yet happened. And that is probably due to the fact that homeschooling is chartered and regulated at a state level.
Several states offer educational tax credits to reimburse parents for the cost of their children’s schooling. Generally, the parents must be paying the money to accredited educational institutions to get the benefit of the credits. The Home Schooling Legal Defense Association has put together a summary of tax credits available by state.
There are some things that you might want to speak to an accountant about such as the Coverdell Education Savings account (ESA). Just remember that Coverdell's ARE NOT government money – it's YOUR money that you've put away into a special savings account that you can draw out TAX FREE if you're paying for educational needs.
People often confuse the generous $250 deduction for educator expenses that is found on federal Form 1040, but this deduction is not permitted for homeschooling. The IRS specifically points that out in the instructions to the Form 1040, page 27.
That said, if you use any of your supplies to do private tutoring or co-op activities, there are some ways to get a portion of that back. Some people suggest that this is possible by turning the tutoring into a business (you can't count your own children in your tutoring business). While small business owners are subject to self-employment tax, the deductions for the first two years usually far outweigh the tax and these parents often end up with a refund.
We really can't go further into the tax code than that because we simply are not certified in that profession, so if you need additional information about the use of supplied in a tutoring or co-op business it would be a good idea to see an accountant.
Additionally, many veteran homeschoolers are opposed to having the federal government offer a tax break, stating that this would only impose more regulation on homeschooling.
What is your view on tax deductions for homeschooling expenses? Does anyone have any creative ideas on how you have handled tax deductions or your expenses? Feel free to post them below.