Income Tax "Do’s and Don’ts" for Homeschoolers

It’s income tax season again in the United States, with the filing deadline (April 15) fast approaching. This is the time of year when many families cross their fingers and pray that the tax man will give them a refund—or at least that he won’t collect additional taxes and penalties. This tax season remember four “Do’s and Don’ts” to help maximize your family’s tax return and avoid making costly filing errors

1. Do Seek Out State Tax Breaks for Homeschoolers

At the state and local level, homeschoolers pay taxes to support the public schools, but few families that choose to educate at home will ever receive any benefit from those taxes. This reality has caused an increasing number of states to consider income tax credits or deductions specifically for homeschooling families. In 2012, Oregon, Virginia, and West Virginia considered state-level tax breaks. And though none of those efforts bore fruit, they are evidence that the idea is catching on.

Thankfully, a handful of states do offer some tax benefits. Be sure to consult your own state’s income tax guidelines to determine if yours is one of them. Of note, Illinois and Minnesota have for some time provided modest tax relief for homeschoolers. Other states with some form of homeschool-related tax benefit (for either individuals or businesses) include Arizona, Louisiana, Pennsylvania, and Florida.

Indiana is an example of a state that has recently added benefits. As of tax year 2011, Indiana families who homeschool (or send their children to private school) are authorized up to $1,000 per child as a deduction from their gross income, for such items as textbooks, computer software, and school supplies. Unfortunately, because this is only a deduction (and not an outright credit), experts say that the actual tax savings are less than $50 per child.

2. Don’t Attempt to Deduct Ineligible Expenses on Federal Taxes

The Federal Government does not offer any tax credits or deductions for expenses specifically associated with homeschooling your children. In fact, the Internal Revenue Service (IRS) expressly excludes homeschoolers from claiming such expenses. Republicans in Congress have discussed the possibility of a tax break at the federal level, but that is not likely to happen any time soon—and definitely not this tax season.

Some may be tempted to find “creative” ways to claim their homeschooling expenses. Don’t do it. For instance, although you may devote a portion of your home to the “business” of home education, that does not make your schoolroom a “home office” under the tax code. Homeschooling is not a business. While families should take advantage of every tax loophole available, do not try to stretch the regulations to cover expenses for which they were not intended. Not only could that lead to problems with the IRS, but it is also morally wrong.

3. Do Take Advantage of Charitable Contributions

Although you should not bend the tax rules, there are plenty of legitimate deductions and credits that can benefit your family. The charitable contribution deduction is a great example. Many homeschoolers are generous to others with their time, talents, and treasure. They often tithe at church, volunteer at homeless shelters, and donate items to food banks and the Salvation Army. These activities teach homeschooled children valuable lessons about morality, finances, and social services, and they also have an added advantage: They are fully deductible on your income taxes (but only if you itemize deductions and do not merely take the “standard” deduction).

Be sure to track your donations throughout the year so that you can take the charitable contribution deduction and reduce your tax burden. To claim a monetary donation you will need documentation, such as a receipt from the charitable organization or a canceled check from your bank. For in-kind contributions (such as clothes, furniture, or computers), be sure that you have some proof of the donation, along with an assessment of its fair market value. You can often obtain that information from the charity itself at the time of donation. You can also deduct out-of-pocket expenses associated with your charitable work, such as gas costs and mileage you put on your private vehicle.

4. Do Explore Whether a Coverdell Education Savings Account (ESA) Works for You

A few states, such as California and Illinois, treat the home school as a private school. For families in those types of states, there may be another federal tax benefit worth exploring: the Coverdell Education Savings Account (ESA).

In essence, Coverdell is a savings account that allows you to deposit up to $2,000 per year toward your children’s education expenses. It was originally envisioned as a way to save for college but has been expanded to include expenses from elementary and secondary education. Money you deposit will grow tax-free and can be used for the purpose of paying certain qualified educational expenses, such as teaching materials, books, and even such things as cable and Internet connections (if used for educational purposes). Although the Coverdell ESA is always a good way to save for college, remember that it cannot be used for homeschooling expenses in states where home education is not the equivalent of a private school.

Those are just a few “Do’s and Don’ts” to think about this tax season, but don’t put off your research until the last minute! Most errors on tax returns are simple math mistakes caused by those who are rushing to get their paperwork done under time pressure. If the deadline sneaks up on you, don’t hesitate to file for an extension with the IRS. My hope for you this “season” is that your family’s homeschooling adventure comes with a tax break.

Antony B. Kolenc (J.D., University of Florida College of Law) is an author, speaker, and law professor at Florida Coastal School of Law. He is also a retired U.S. Air Force officer. He and his wife have homeschooled their five children for over a decade. Tony is author of The Chronicles of Xan historical fiction trilogy, as well as many legal articles. Learn more about him at www.antonykolenc.com. If you have a law-related homeschooling question that you would like to see Tony address in a future column, please email TL@TheHomeschoolMagazine.com.

Copyright 2013, used with permission. All rights reserved by author. Originally appeared in the March 2013 issue of The Old Schoolhouse® Magazine, the family education magazine. Read the magazine free at www.TOSMagazine.com or read it on the go and download the free apps at www.TOSApps.com to read the magazine on your mobile devices.

Publication date: April 4, 2014