Are There any Tax Breaks for Sending Kids to Private School?

As a parent, you have the choice of sending your kids to public school or private school. As it stands, the federal government doesn't offer any explicit tax breaks if you choose to take the private school route for your child's K-12 education. However, the government does offer tax breaks, and ways to save on costs related to caring for, and educating, your children. Your state may also offer tax breaks, which can help to get back some of the money you spend on tuition, when you file a state tax return.

Child Care and Special Needs Tax Breaks
You may be able to lower the upfront cost of care your child needs after school through the Child and Dependent Care Credit. This offers parents with one child a credit of up to $3,000, and parents with two or more children, up to $6,000. You can use the credit to offset the cost of after-school childcare services offered by your child's private school or another service in the community.

If your child has special needs, as determined by a qualified physician, and must attend a specialized private school for those needs to be met, this may qualify as a medical expense. If the expense qualifies under your filing, it may be deductible and can offset tuition costs (more on deducting medical expenses). Please note that you must itemize deductions to qualify for this type of tax benefit.

The IRS’s definition of a child with a disability means their physical or mental condition prevents them from engaging in any substantial or gainful activity. Additionally, a doctor must determine that the condition has lasted (or can be expected to last) for at least a year.

Coverdell Education Savings Accounts
A Coverdell Education Savings Account (ESA) is an investment account that can pay for a child’s elementary, middle, high school, or college expenses. Putting away money in an ESA doesn't reduce your tax bill, but you don't pay taxes on the earnings, as long as the funds are used for tuition, fees, and supplies. Non-qualified withdrawals may be subject to a 10% penalty on gains and income.

You can use the money saved in an ESA to pay for your child's private school education, including textbooks, supplies, and tuition. The maximum contribution to an ESA is capped at $2,000 per child and may be reduced based on your income.

Section 529 Plans
529 plans have been around since the late 1980s and became federally recognized in 1996. The plans have been in place to help families pay for college expenses. In 2017, the federal government passed a law that allowed 529 plans to fund K-12 private school expenses.

Under the plan, families can withdraw up to $10,000 annually, or the cost of tuition (whichever is less).

While 529 plans are federally recognized, they're operated at the state level. States including California, Hawaii, Illinois, Michigan, New York, and Vermont don’t recognize K-12 tuition as a qualified expense that can be funded with a 529 plan. No federal penalties would be imposed on withdrawals, however, penalties and taxes could be levied by the state. Be sure that your state allows the use of 529 funds for elementary and secondary education before withdrawal.

Higher Education Credits
As a parent, you don't get any direct tax credits or deductions from the federal government until your child goes to college. Once enrolled, however, you can take advantage of the American Opportunity Credit, the Lifetime Learning Credit, or tuition deductions to reduce your tax bill. These tax breaks can be used to help offset the cost of tuition, books, and other supplies needed for your child's college education, and are available for students enrolled in both private, or public, colleges and universities. Read more on tax savings for students.

State Tax Credits
Some states, such as Louisiana, Illinois, Ohio, and Wisconsin, offer tax breaks, deductions, and credits to help offset private school costs. Such incentives vary widely, so be sure to contact the state treasury or tax agency to determine benefit eligibility requirements and amounts.

Frequently Asked Questions

I'm sending my child to a religous private school, not a secular one. Can I deduct tuition costs because the church runs the school?
In most cases, no, even if your private schools is overseen by religious institution. The IRS considers any private school costs as personal education expenses, not qualified higher-education costs.

Can I deduct 529 contributions?
Not on your federal tax return. However, some states do provide credits or allow deductions. Check with your state-specific 529 website for information.