Tax credits for homeschooling families

A couple of days ago, I posted a link to a (1998 vintage) HEM article about tax credits: Are Tax Credits for Educational Expenses a Good Idea for Homeschoolers? Some points in the article are:

• credits are for government approved qualifications
• “If state legislatures and the general public can be convinced that tax credits … are a good idea, they will gradually … accept the general idea that it is all right for the government to give money to private schools.”
• “It would be difficult … for us homeschoolers to participate in a system of tax credits without being influenced by the government’s ideas about education…”
• “If we agree to tax credits, we are agreeing to let the government determine which expenditures qualify for tax credits and which do not.”
• “If we wanted to receive tax credits, we would have to make sure that at least part of our homeschool (the part for which we wanted to receive tax credits) conformed to public school standards.”

Of course, not everything mentioned in the article is demonstrated in the two states that allow homeschoolers to claim a tax credit for educational expenses. Neither Illinois nor Minnesota require that homeschooling parents be qualified teachers, although Minnesota’s laws about homeschooling are stricter than those in Illinois. From the article, “It should be noted that Minnesota law already requires that homeschoolers take standardized tests each year, so strong accountability requirements are already in place in Minnesota.”

Because of the age of the article, readers have asked whether any of the cautions mentioned in the article have come to pass since 1998. I don’t know. I have not seen any mention of tax credit repercussions for homeschooling families, but if they are small enough, and private, they would escape public notice. Then again, perhaps nothing has happened. Or perhaps families heeded the warnings and don’t participate.

I decided to get a better understanding of the effects of tax credits in general, and tuition tax credits in particular. This is my first step, so I’ll share what I find. Conclusions may have to wait, and the information will not be comprehensive because I’d like to get this posted while this conversation is still fresh.

Readers can compare the concerns of the article to the laws in Minnesota and Illinois. Do the qualifications limit what can be claimed? Is this a way to guide what families will spend money on? Can this be thought of as government control? Naturally, opinions will run the gamut because people have different levels of tolerance for justification of their activities. What one person sees as intolerable nosiness, another sees as the cost of doing business.

The following is just one day’s worth of gathered information, but it should supply readers with enough links and key words to search for more information.

Tuition tax credit explanations

The Universal Tuition Tax Credit: Achieving Excellence in Education without a Tax Increase, Virginia Institute for Public Policy (Virginia-plan specific for the late 1990s)

States with programs

• Just the FAQs, The Center for Education Reform
  Limited school tax credits/deductions (that include private school tuition) exist in Minnesota and Iowa. Arizona offers a tax credit for donations to privately funded voucher programs. Illinois, Indiana, Michigan, and Wisconsin are giving tax credits serious consideration. South Dakota, Utah, Virginia, Idaho, Maryland, Missouri, and Oregon have reviewed the idea.

Illinois has had tuition tax credits since 1999, so the information from The Center for Education Reform is dated.

• National Conference of State Legislatures, Tuition Tax Credit and Deduction

Organizations that are either Pro or Con on tuition tax credits

For tax credits:

• Virginia Institute for Public Policy (same URL as above in the “explanations” section)
• Federal Tax Benefits for Families’ K-12 Education Expenses in the Context of School Choice, First Amendment Center (28 pages)

Against tax credits:

• People for the American Way

Qualified educational expenses information

Federal

• HOPE and Lifetime Learning tax credits, deduction for student loan interest (example of federal requirements)

Arizona

• Arizona scholarship programs allow donations to School Tuition Organizations. These donations can be either for anyone, or designated for a specific person. Individuals may not donate for anyone in their immediate family.

Florida

• Corporate Tax Credit Scholarship Program
  The law provides for state tax credits for contributions to nonprofit scholarship funding organizations, called SFOs. The SFO’s then award scholarships to eligible children of families that have limited financial resources.

Illinois

• Schedule ED Credit for K-12 Education Expenses
  $500 max after $250 ‘deductible’
  disclosure of children’s names and SSNs (no homeschool registration is required in Illinois)
  any material that is not “used up” is ineligible (such as musical instruments)

• Education Expense Credit General Rules and Requirements for Home Schools
  You must also attach receipts for education expenses paid for the qualifying student(s) during the calendar year. We will not accept a cancelled check as a receipt. The receipts must show
  – the type and amount of education expenses paid for each qualifying student during the calendar year,
  – the calendar year during which the education expenses were paid,
  – the name and address of the business to whom the expenses were paid,
  – and the name of the parent or guardian who paid.

Iowa

• Iowa state income tax credit
  “Yes. Taxpayers, who have one or more dependents attending grades K-12 in an ‘accredited’ Iowa school, may take a credit for each dependent for amounts paid for tuition and textbooks in a amount not to exceed 25% of the first $1,000 paid for each dependent for tuition and textbooks. … Expenses for textbooks or other items for homeschooling, tutoring, or schooling outside an accredit school do not qualify for the credit.”

Minnesota

• Qualifying Home School Expenses for K-12 Education Subtraction and Credit
  Minnesota has two programs — the K–12 education subtraction and the K–12 education credit subtraction
  expenses only for expenses incurred during the “regular school day” for subjects taught in K-12 public schools
  “Do not include expenses for materials used to set up a home school, such as desks, whiteboards, etc. These types of expenses do not qualify.”
  “Your expenses paid for most nonreligious books qualify if the books are used in teaching subjects normally taught in public schools.”
  “The cost for equipment that is normally provided by the school does not qualify.”
  “Only instructor fees paid for direct academic instruction by a qualified instructor qualifies as a subtraction or credit. Do not include any books or materials used during the after-school program.”
  Common expenses that do not qualify for either the subtraction or credit include:
  – fees paid for membership in an association (e.g., YMCA, sports or health clubs, museums, zoos, Home Based Education Accredited Association, etc.)
  – seminars for the parent
  – diagnostic fees to decide what assistance the child needs
  – fees for PSAT, SAT or ACT fees or tuition for correspondence schools
  …
  – materials used for setting up a home school (e.g. desks, whiteboards, demo kits, maps, globes, etc.)
  – expenses for books, materials and fees paid for a program that teaches religious beliefs
  …
  – printed encyclopedias or reference materials

Pennsylvania

• Educational Improvement Tax Credits (EITC)
  Tax credits to eligible businesses contributing to a Scholarship Organization, an Educational Improvement Organization, and/or a Pre-Kindergarten Scholarship Organization.

Rhode Island

• Tax Credits for Contributions to Scholarship Organizations
  Application to be completed by business entity interested in donating to qualified scholarship organizations

[I added the underlining to make it a bit easier to read.]

posted by Valerie

Tags: educational tax credits, home education, homeschooling, homeschooling tax credits, tuition tax credits

This entry was posted on January 7, 2008 at 8:18 pm and is filed under News-Commentary. You can follow any responses to this entry through the RSS 2.0 feed.