Private School Tuitions: Can you deduct them in your tax return?

Private School Tuitions: Can you deduct them in your tax return?

You may have heard of people who were able to claim a tax credit for the expenses they made on their child’s after-school program or get all kinds of tax perks by being enrolled at the local community college. Don’t worry, you can claim your own tax break too. However, you will need to dig a little deeper for any savings as some help is not at the federal level.

Expenses on Education

For private school education costs, K-12 education expenses are not tax-deductible at the federal level. For post-secondary and other types of costs, educational expenses are tax-deductible. This also includes community colleges, universities, trade or vocation schools, and another accredited education program following high school pretty much. Notice that grade school and high school tuition and expenses don’t count.

Special schooling for disabilities is generally involved in one big private school exception.

Before and After School Care Deduction

The Child and Dependent Care Tax Credit is where the deduction for before and after school care falls into.

If you need to work or need to look for work, you may qualify for the Child and Dependent Care Tax Credit if your child attends a before or after school care program. Your spouse must also work or need to look for work if you’re married.

The IRS says if your child is older than the age 13, she doesn’t require supervised care when you’re unavailable.

Although private and public school programs are qualified for this credit, you must separate the cost of the care from any tuition you pay if you send your child to private school. You should be able to receive assistance from the school.

The credit amount varies per taxpayer and is calculated on up to $3,000 in total work-related childcare expenses for one child, or for two or more children it’s $6,000. If in order for you to work or look for work and you had to spend $1,500 for the after-school care program $500 for summer camp, a percentage of these costs can be claimed by you as a tax credit. Your adjusted gross income is the basis of the amount of the percentage.

How 529 Savings Plans can help

Although a 529 plan also called a “qualified tuition plan” works just like an IRA, it is for educational purposes only. Prepaid tuition plans and education savings plans are the two types of 529 savings plan. At least one kind of plan is being sponsored by every state. These plans are established and designated the education costs of the beneficiary.

At the federal level, contributions to the plan aren’t tax deductible but as long as your beneficiary uses the money for educational purposes, their growth is tax-free. At the state level, some tax deductions and credits do exist.

The Tax Cuts and Jobs Act (TCJA) beginning in 2018 changed these plans that used to be for post-secondary education only. These plans can now be established and used by you for K-12 education costs. 

There is no limit up to the plan’s maximum capacity for parents or anyone who would like to contribute to a 529 plan. Gift tax exemptions are something that contributors must watch out for. For a single individual, the gift tax exemption is $15,000 in 2018 and if there is anyone who contributes more than that can expect to be subjected to gift taxes in an IRS audit.

Take Advantage of the Coverdell Education Savings Account

Introduced in the Taxpayer Relief Act of 1997, the Coverdell Education Savings Accounts isn’t exactly a tax break for paying tuition but it’s a tax break all the same. It doesn’t only apply to post-secondary educational costs but for expenses in high school and elementary school as well.

Coverdell ESA allows you to contribute up to $2,000 a year and although your contributions aren’t tax-deductible, while it’s in the account your money grows tax-free. Both contributions and accumulated interest can be withdrawn for tuition and other qualified expenses without the capital gains being paid.

To qualify for this tax break as of 2018, your modified adjusted gross income must be less than $110,000 if you’re single. If you’re married and filing a joint return, the limit doubles. The modified adjusted gross income of most taxpayers are the same as their adjusted gross income but to be sure, you may want to check with a tax professional.

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