Update: This article was last updated on 19th April 2023 to reflect the accuracy and up-to-date information on the page.
Tuition expenses are not deductible from federal income taxes. There are ways for parents to reduce the costs of education.
|529 College Savings Plans
|State-sponsored investment accounts that allow for tax-free growth and withdrawals for qualified education expenses.
|Coverdell Education Savings Accounts
|Similar to 529 plans, but with a few differences. Contributions are limited to $2,000 per year, and there are income limits to be eligible to contribute. Can be used for K-12 expenses as well as higher education expenses.
|Two federal tax credits are available to help offset the cost of higher education expenses: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
|Employer Tuition Assistance
|Some employers offer tuition assistance programs to help employees further their education. It can cover some or all of the cost of tuition, and benefits received may not be taxable as income.
|Scholarships and Grants
|Offered by schools, private organizations, or the government, and can help reduce the amount of out-of-pocket expenses for education.
Is private school tuition tax deductible?
What is the school tuition fee?
Parents often discuss the cost of sending their child to school, college, or university, especially if attending a private school.
Public schools are generally free in the United States, but private schools require fees. While there are some exceptions to this rule, such as dependent child benefits, Coverdell Education Savings Accounts, and American Opportunity Tax Credit (AOTC), eligibility varies by parent.
Tuition fees vary by institution and may offer discounts or financial aid. Fees are typically charged per credit or semester and cover the cost of instruction, academic materials, and other resources provided by the institution.
Is private school tuition tax deductible in the US?
Private school tuition cannot be deducted from taxes, but there may be some exceptions to this general rule.
One exception is if you are using the tuition payment to cover education expenses for a dependent child, which includes children under the age of 18 and those who are over the age of 18 but are unable to support themselves due to a physical or mental disability.
Dependent children may be eligible for certain benefits, such as the child tax credit, which is a tax credit that is available to parents and guardians who have dependent children.
In addition, dependent children may be covered under their parent or guardian’s health insurance policy. In this case, you may be able to claim the tuition payment as a dependent care expense on your tax return if it meets the criteria for the dependent care tax credit.
To claim this credit, you must have paid for the tuition expenses while working or looking for work.
Does private school count for the child tax credit?
Private school tuition expenses generally do not qualify for the Child Tax Credit in the United States. The Child Tax Credit is typically based on the child’s age, relationship to the taxpayer, and the taxpayer’s income.
However, there are other education-related tax benefits, such as
1. 529 College Savings Plans: These are state-sponsored investment accounts that allow for tax-free growth and withdrawals for qualified education expenses. Contributions to a 529 plan are made with after-tax dollars, but earnings can grow tax-free if used for qualified education expenses.
2. Coverdell Education Savings Accounts: There are other federal programs, such as Coverdell Education Savings Accounts, that help parents save money on K–12 private schooling indirectly. Contributions are limited to $2,000 per year, and there are income limits to be eligible to contribute. However, Coverdell accounts can be used for K-12 expenses as well as higher education expenses.
3. Tax Credits: There are two programs under this.
a) The American Opportunity Tax Credit (AOTC)
AOTC: Maximum annual credit of $2,500 per eligible student.
If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.
b. Lifetime Learning Credit (LLC)
Who can claim the LLC?
The applicant must meet all three of the following criteria:
- You, your dependent, or a third party pay qualified education expenses for higher education.
- You, your dependent, or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution.
- The eligible student is yourself, your spouse, or a dependent you listed on your tax return.
4. Employer Tuition Assistance: Some employers offer tuition assistance programs to help employees further their education. These programs may cover some or all of the cost of tuition, and the benefits received may not be taxable as income.
5. Scholarships and Grants: Students may be able to reduce the cost of tuition by applying for scholarships and grants. These can be offered by schools, private organizations, or the government and can help reduce the amount of out-of-pocket expenses for education.
It’s important to note that eligibility for these credits and deductions may depend on a number of factors, such as your income, the type of educational expenses you are paying for, and whether you are paying for a degree program or other educational expenses.
You should consult with a tax professional or refer to the Internal Revenue Service (IRS) guidance to determine whether you may be eligible for these credits and deductions.
Where can you find the detailed information?
The Internal Revenue Service (IRS) website – provides the details about the child tax credit, which is available to parents and guardians who have dependent children under the age of 17.
- It says that the Child Tax Credit is a fully refundable tax credit for families with qualifying children.
- In 2021, the American Rescue Plan expanded the Child Tax Credit to get more help to more families.
- The credit increased from $2,000 per child in 2020 to $3,600 in 2021 for each child under age 6.
- For each child aged 6 to 16, it’s increased from $2,000 to $3,000. It also provides $3,000 credit for 17-year-olds.
- The families don’t need to have income or a permanent address to claim this tax credit if they’re eligible.
In general, there is no federal education credit or deduction when paying for a private school at the elementary or secondary level. However, you can claim a tax credit for private schools if you pay for your children’s college tuition.
Any type of tax is a niche area and if you are an American citizen, it is advisable to consult a tax professional or refer to the IRS expert or visit the IRS website, which has all the details.