NOTE: This article is intended for informational purposes only and is in no way offered as legal or financial advice. It is important that you consult a tax professional before making any investment decisions.
Some Positive Changes for Taxpayers
It’s tax season again and the new tax reform law includes some good news for parents, especially for those with children enrolled in public, private or religious schools. Most of the changes related to the new law will not impact filing of 2017 taxes, but will apply to all taxpayers beginning with the 2018 tax season.
First, as related to non-education tax savings for parents, the Child Tax Credit has doubled to $2000 per eligible child. This will potentially leave families with a bit of discretionary income that could possibly be applied to the cost of enrollment and attendance at public, private or religious schools, including homeschools. In addition, the Child Tax Credit is now “refundable.” This means that taxpayers who do not have a “tax liability” (who essentially owe no taxes) can still receive up to $1400 per child as a credit against their income.
Another item of good news is that the top income level above which a Child Tax Credit could not be taken has gone up. Before 2018, a married couple filing jointly showing combined incomes of $110,000 or more would receive a lower deduction under the Child Tax Credit. Beginning in 2018, the top income level eligible for the credit has been raised to $400,000 for a married couple filing jointly.
Good News for Expenses related to K-12 Public, Charter and Private Schools
Tax-Deferred 529 Savings Plans: “Qualified Tuition Programs” (also known as 529 plans) were initially designed to help families save for a child’s higher education expenses. Savings deposited to 529s are allowed to grow free of federal income taxes and withdrawals can be made tax-free. Traditionally, the tax exemption was allowed as long as the money was used for higher education expenses, but the new law expands how the funds can be used.
What’s new about 529 savings plans is that families can use the money they deposit to these accounts to pay for K-12 “tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school” – including charter schools, which are considered to be public schools. In addition, many states offer tax deductions for contributions to 529 plans. Some states allow deductions that are substantially larger than $10,000. To learn about your state’s 529 regulations and whether you are eligible for a state-based tax reduction, visit: http://plans.collegesavings.org/viewState.aspx.
Tax Deductions for Homeschool Expenses
For a brief time during Congressional negotiations related to the tax bill, it looked as though parents MIGHT be allowed to use money deposited to their 529 savings plans to pay for homeschooling expenses. Unfortunately, the final law states that homeschoolers will NOT be able to use the funds to offset the cost of homeschooling, but can still use the money for their child’s higher education expenses.
Although homeschoolers cannot start a business or a nonprofit group and then deduct related homeschool costs, some states do allow deductions for homeschool expenses. For instance, Illinois R.S.47:297.11 relates to Education Expenses for Home-Schooled Children and parents whose school has been approved by the State Board of Elementary and Secondary Education. As a result, Illinois homeschoolers may be eligible for a deduction of 50% of the actual qualified expenses paid for home-schooling per dependent with an upper end limit of $5,000.
NOTE: If you are a parent running a homeschool, be sure to check with a tax expert to find out exactly what your state allows for tax deductions related to K-12 homeschool expenses.
Online Private Schools
If your child is enrolled in and attending a licensed, fully accredited online private school, you may be eligible to use money deposited to a 529 pre-tax savings plan to cover the cost of tuition, books and other approved expenses. Check with a tax expert to find out if there are steps that must be taken before the end of the year to ensure your eligibility for the deduction.
For more information about homeschooling and seven full programs of excellent online curriculum choices, visit www.globalstudentnetwork.com. To learn how to register your child in a fully-accredited, private online K-12 school, goto www.internationalvla.com
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