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Are there any tax breaks for home schooling?


Dear Tax Talk,
Can Coverdell money be used to pay for home schooling costs? I know IRS publications cite "eligible educational institution" when discussing allowable disbursements from these accounts, specifically:

Eligible elementary or secondary school. This is any public, private or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law.

Would a home-based school run by a parent count? Also, could that parent then claim the above-the-line deduction for educator's expenses? Thanks. -- Kay
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Dear Kay,
Education IRAs are another of the newer, greater ways that a parent or other relative can save for a child's educational needs on a tax-deferred basis.

Although the allowable contribution of $2,000 is not deductible by anyone, the accounts grow tax free. The account's funds can be withdrawn tax free if they're used to pay for educational expenses. The best part is that they can be used for your child's early education costs, whereas other savings devices, such as Section 529 plans, are limited to higher education costs.

As you point out, the funds have to be used for an eligible school. From what I found, most states regulate home schooling to some extent, but none would be considered an eligible institution in itself. In Florida, I found that some home schools can be affiliated with what are called Chapter 600 schools, referring to a specific section of the Florida statutes. Depending on what type of home schooling you choose, these institutions would probably qualify for Coverdell funds.

An educator is allowed a deduction of up to $250 as an above-the-line deduction for school supplies. The IRS publications state that an eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in a school for at least 900 hours during a school year. In addition the person has to be an employee, since the items would have to be otherwise deductible as employee business expenses. As a home schooler, you would not qualify for the deduction.


-- Posted: Dec. 1, 2004




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