Currently, 529 funds may be used to pay for private elementary and secondary school tuition only. Beyond tax breaks and savings plans, there are many other ways to find financial assistance for private schools. Families using 529 plans or ESAs should also keep records of contributions, withdrawals, and how funds are used. For deductions or credits tax credits for private school tied to charitable contributions or state-specific incentives, acknowledgment letters from schools or scholarship organizations are necessary. These letters must meet IRS standards, confirming the institution’s tax-exempt status and stating that no goods or services were received in return.
It’s important to maintain detailed documentation and confirm eligibility. For example, Roza said, if an SGO is dedicated to providing additional science education to students and a public school is offering a science camp, then the public school could receive these scholarship funds. Another exception is merit-based scholarships, which are based on a student’s academic achievements, talents, or other qualifications. These awards are highly competitive and can cover a substantial portion of the tuition costs.
Coverdell Education Savings Account (ESA)
A 529 plan, also called a “qualified tuition plan,” works similarly to an IRA but for educational purposes. These savings plans have long provided help with private post-secondary school expenses. They could only be used to pay for secondary education at one point, but the TCJA changed tax law to allow parents to use these plans for K-12 education costs as well. Some state tax credits and scholarship programs may apply to accredited online private schools, but eligibility varies. It’s important to confirm whether your state recognizes online private schools for tax benefits or scholarship programs. 529 plan withdrawals can still be used for online private K–12 tuition if the school qualifies.
Like the American Opportunity Credit, you can’t use this credit to lower the cost of private school K-12 education. The federal tax credit plan has also caused a split among some political liberals, including the group Democrats for Education Reform. Two of its leaders left recently to form a political action fund that supports charter schools and opposes private school vouchers and tax credits. EdTrust has nicknamed the law the “Great American Heist” for its private school choice provision and changes to Medicaid, food stamps and college loan repayment programs. The law “would dismantle the very programs that make education and economic advancement possible for students of color, first-generation college students, and low- and middle-income families,” EdTrust’s statement said. According to the Institute on Taxation and Economic Policy, there is no other charitable giving structure that allows this type of dollar-for-dollar tax incentive.
A taxpayer may make a qualified contribution of up to $1,700 per year and receive a 100 percent credit reduced only by any amount allowed on a state tax return as a credit for qualified contributions. Under the “big, beautiful bill,” donors can receive dollar-for-dollar tax credits of up to $1,700 for contributions to scholarship-granting nonprofits. Those groups then distribute the money to families seeking help paying for private school, tutoring and other educational expenses. When it comes to federal tax breaks, K-12 private school tuition doesn’t get much attention. For one, if you have a child with special needs who attends private school, you may be able to deduct certain expenses related to their private school education. You may also be able to offset some related qualifying instructional and/or medical expenses.
- In this way, it’s similar to a 401(k) or IRA, but it’s specifically for education.
- Contributions grow tax-free, provided the funds are used for qualifying educational expenses, which can include tuition, textbooks, tutoring, and therapies.
- While the legislation has passed both chambers of Congress, it now returns to the House for further votes before it can head to President Donald Trump’s desk.
- It provides a discussion on IRS rules and exceptions in claiming tax breaks.
- An eligible educational institution is a school offering higher education beyond high school.
Elementary and Secondary School Tuition
In a statement released Monday, he called on the state Legislature to weigh in during the upcoming legislative session and not default to letting the governor decide. Twelve of these states have Democratic trifectas, two have Republican trifectas, and two have divided governments. The Code provides generous tax benefits to private colleges and universities.
Additional Private School Financial Support Opportunities
While the items our Tax Team discusses below are not yet law and are subject to change, it is important to understand and follow the bill as it moves through Congress. “This is a lifeline for families in states that have yet to act on school choice,” he said in a statement. “It’s partly a referendum on how the American public feels about vouchers.
- Eligibility often depends on household income, special needs status, or attending an underperforming public school.
- Some websites will say you can’t get any tax breaks for sending your kids to private schools from kindergarten through 12th grade, but that’s not entirely accurate.
- This approach allows extended family members to help with education costs without giving direct tuition payments.
- For many families, choosing private school education is driven by a desire for a more personalized and enriched learning environment.
- Some employers offer tuition reimbursement or education assistance as part of their employee benefits.
- The Joint Committee on Taxation estimated that the cost of the new provision will be $25.9 billion over the 10-year budget window (JCX-35-25).
Before-School and After-School Care Costs
The means, for example, students in Memphis living in households with incomes of up to $364,400 could be eligible, based on a median family income of $91,100. Martin Lueken is Director of EdChoice’s Fiscal Research and Education Center (FREC). His work and research cover areas including education choice, school funding, and teacher pensions. Marty’s expertise and advice help policy makers, researchers, and stakeholders understand the fiscal impact of current school choice programs and potential fiscal effects of programs introduced in state legislatures. • On the federal level, qualified 529 plan withdrawals are free from income taxes or capital gains taxes. People in higher tax brackets will see greater savings than those in lower tax brackets.
These expenses can include tuition fees, required course materials, and certain other related expenses. However, expenses such as room and board, insurance, and transportation are typically not eligible for deductions. Generally, fees for after-school programs, sports, or extracurricular activities are not tax-deductible. These costs are considered personal expenses, not qualified educational expenses for tax purposes. However, if part of a dependent care program, some fees might qualify for the Child and Dependent Care Credit. Education Savings Accounts (ESAs) are another state-driven initiative supporting private education.
The School House Anywhere (TSHA) provides a comprehensive and engaging curriculum, American Emergent Curriculum (AEC), along with a supportive online community, at a cost that’s often less than traditional private school tuition. Explore the tax implications of private school tuition, including potential credits, deductions, and savings strategies. Currently, 30 states and the District of Columbia have at least one private school choice program, according to an Education Week analysis. There’s been particular momentum in recent years to Republican-led states to expand existing programs and pass expansive new ones for which all students are eligible.
Employer Tuition Assistance Programs
Section 529 plans and Coverdell ESAs let you grow tuition savings tax-free. Contributions aren’t deductible federally, but earnings accumulate tax-free if used for qualified education expenses. Since 2018, a 529 plan can cover up to $10,000 per year for K–12 tuition at any private, public, or religious school. For example, a parent in Arizona using $8,000 from a 529 plan for private high school tuition would owe no federal tax on that distribution (though the $8,000 wasn’t deducted when contributed). Another tax-advantage savings account to help pay for your child’s education is a 529 plan.These accounts are typically used for private, public, and religious K-12 education, depending on the state, as well as college.
Robert Kim, executive director of the Education Law Center, blasted the new program. Each year, hundreds of thousands of taxpayers claim these state-based credits, and you could save anywhere from $100 to $10,000 based on your state’s programs. To qualify for the AOTC, an eligible student must be pursuing a degree or other recognized educational credential, and they must be enrolled at least half-time for at least one academic period during the tax year.