Got Kids in Private School? Don’t Forget This Little-Known Tax Deduction

Mar 13th, 2015

If you send your kids to private elementary or high school or homeschool them, there’s an Indiana tax deduction that you should use. You can deduct $1,000 per dependent child.

This is a deduction, not a tax credit.  A deduction reduces your taxable income, before calculating state and local tax. So, a $1,000 reduction in taxable income, saving state tax at a 3.4% rate and county tax at an average of 1.0% to 1.62% rate will save you $44 to $50 per child. Not huge but it keeps your money in your pocket. The more times you can do that the better off you’re going to be.

Private School/Homeschool Deduction 626

You may be eligible for a deduction based on education expenditures paid for each dependent child who is enrolled in a private school or is homeschooled.

Dependent Child Qualifications

• Your dependent child must be eligible to receive a free elementary or high school education (K-12 range) in an Indiana school corporation;

• You must be eligible to claim the child as a dependent on your federal tax return; and

• The child must be your natural or adopted child or, if not, you must have been awarded custody of the child in a court proceeding making you the court appointed guardian or custodian of the child.

Education expenditure. This refers to any expenditures made in connection with enrollment, attendance, or participation of your dependent child in a private elementary or high school education program. The term includes tuition, fees, computer software, textbooks, workbooks, curricula, school supplies (other than personal computers), and other written materials used primarily for academic instruction or for academic tutoring, or both. The term does not include the delivery of instructional service in a home setting to your dependent child who is enrolled in a school corporation or a charter school.

Figure your deduction. If you made an unreimbursed education expenditure during the year your deduction is:

• $1,000; multiplied by

• the number of qualified dependent children for whom you made education expenditures.

Example. Greg and Constance have three children ages 7, 9 and 11. The two oldest children attend a private school. The youngest child attends the neighborhood public school. The parents purchased schoolbooks for all three children. They will be eligible for a $2,000 deduction (the youngest does not qualify as he attends a public school).

Find out more details in the Indiana IT-40 Booklet here

At $44 to $50 per child this is not a huge savings. But if you have multiple children in private schools it could be a couple hundred bucks. And if you have children in school you probably have a 529 plan for their college savings. If you use the Indiana CollegeChoice 529 Plan you also get a 20% tax credit for contributions to that. To see how to claim your credit click here

This deduction was new in 2012 so this is only the third tax year it’s been around and a lot of people still don’t know about it. So make sure your friends know about it and let’s all save a little bit of money this tax season.


Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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