Is Private School Tuition Tax-Deductible?

Claiming tax deductions can help to reduce your taxable income for the year. As a parent, there are a number of child-related expenses you might be able to write off to lower your tax liability. But is private school tuition tax-deductible? The answer is no for federal tax purposes but it’s possible that you may be able to claim other tax breaks for funding your child’s education. You can also hire a financial advisor who can provide help with all of your financial planning needs, from tax planning to investment management.

Private school tuition payments cannot be deducted from your federal taxes. The federal government does not offer a tax credit either for parents who fund private school tuition. Tax credits can be valuable, as they reduce your tax liability on a dollar-for-dollar basis. States, may, however, extend tax benefits to parents who pay private school tuition.

These states offer a tax credit for parents who cover the costs of a private school:

Arizona
Illinois
Iowa
Minnesota
Ohio
South Carolina

Meanwhile, Indiana, Louisiana and Wisconsin offer deductions for private education expenses. Each state’s program is different with regard to who is eligible and how much tax relief is available.

If you don’t live in one of those states, then you generally won’t be able to deduct private school tuition on your taxes or get a tax credit for those payments. There are, however, some other education tax benefits you may be able to take advantage of, and there are numerous ways to help you pay for an education.

Deducting Private School Tuition for Special Needs Students

It’s possible that you may be able to deduct private school tuition for a special needs child indirectly. Costs paid toward special education, including private school tuition and tutoring, can be counted as deductible medical expenses if:

Private education is medically necessary, and that need is documented by a physician
You itemize deductions on Schedule A of Form 1040

For 2022, you can deduct the portion of eligible medical expenses that exceed 7.5% of adjusted gross income (AGI). Whether it makes sense to claim this deduction, however, depends on whether you have other itemized deductions to claim.

If the standard deduction would yield a larger tax benefit, you’d likely want to claim it instead. The standard deduction for 2022 is $12,950 for single filers and $25,900 for married couples filing jointly. Comparing the standard deduction against your estimated itemized deductions can help you to decide which one to claim.

Tax Benefits for Education Savings

Setting money aside for education costs could pay off if you’re using tax-advantaged accounts to save. For example, you might put money into a Coverdell Education Savings Account (ESA). These accounts allow you to contribute up to $2,000 per year on behalf of a student beneficiary until they turn 18. That money can then be withdrawn tax-free to pay for qualified education expenses, including private school tuition.

Contributions to a Coverdell ESA are not deductible on your federal taxes. It’s also important to note that all money in a Coverdell ESA must be withdrawn by the beneficiary’s 30^th birthday in order to avoid a steep tax penalty.

A 529 college savings plan is another way to plan for education costs while snagging some tax breaks. All 50 states offer at least one 529 program and you don’t have to be a resident of a specific state to save in its plan.

Money added to a 529 grows on a tax-deferred basis and can be withdrawn tax-free when used to pay for qualified education expenses. That includes withdrawals of up to $10,000 per year to pay for private school tuition for grades K through 12.

Again, you won’t be able to claim a deduction or credit for 529 plan contributions at the federal level. Many states, however, offer parents tax benefits for saving money in a 529 account. It could be worth checking your state’s tax rules to see if you might be eligible for a deduction or credit.

Tax Benefits for Higher Education

Once your child graduates and is ready to head off to college, that opens the door to additional tax breaks. If you’ve been saving in a 529 plan, you can continue to withdraw those funds tax-free to pay for qualified higher education expenses. You may also be able to claim tax credits for education expenses you pay out of pocket.

American Opportunity Tax Credit: The American Opportunity Tax Credit is available for students who are in their first four years of higher education. The credit maxes out at $2,500 per year and applies to any qualified education expenses you’ve paid.
Lifetime Learning Credit: The Lifetime Learning Credit can provide up to $2,000 in tax relief each year for parents or students who pay eligible education expenses. This credit extends to undergraduates as well as students pursuing graduate and professional degrees.

Note that the IRS does not allow double-dipping when claiming tax benefits for education expenses. Therefore, you can’t claim the American Opportunity Tax Credit and the Lifetime Learning Credit in the same year for the same expenses. Talking to a tax professional or your financial advisor can help you coordinate the best strategy for maximizing these education tax benefits.

Saving Money on Private School Tuition

Private school can be costly, and it may require some creative financial planning in order to be able to afford it. While you can’t deduct the costs on your federal taxes, there may be other ways to pay less out of pocket.

Some of the options you might have for reducing private school tuition include:

Scholarships or grants (both merit-based and need-based)
State-sponsored voucher programs
Tuition loans offered through private lenders
Tuition payment programs offered by the school
Sibling discounts

You may be able to use a combination of these options to reduce what you pay for private school tuition or at least reduce the strain on your budget. A payment plan, for example, might be easier to manage than having to produce a lump sum of money at the start of each school year.

Your child’s school may have a specific application or process that’s required to be considered for financial aid. Timing may be important if aid is limited so if you think your child may need scholarships, grants or other aid to attend school you’ll want to apply as early as possible.

If you’re considering tuition loans or personal loans, take time to compare the options. Specifically, look at things like:

Minimum and maximum loan limits
Repayment terms
Interest rates
Fees
Estimated monthly payment

Remember that with loans, you’re taking on debt and, unfortunately, the IRS doesn’t allow you to deduct interest paid to personal loans either.

The Bottom Line

Private school tuition is not tax-deductible, but you may be able to leverage some tax benefits if you’re saving in a tax-advantaged account or claiming tax breaks at the state level. Also, remember that there are other tax benefits you may qualify for as a parent. The Child and Dependent Care Credit, the Child Tax Credit and the Earned Income Credit could all help you to save money at tax time.

Tax Planning Tips

Consider talking to your financial advisor about the best ways to plan for private tuition expenses and/or higher education costs. Your advisor can help you to map out a strategy for covering those expenses while keeping tax planning in sight. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When comparing 529 college savings accounts, remember that while the plan itself may not have an annual contribution limit the gift tax limit still applies. As of 2022, you can give someone up to $16,000 without triggering the gift tax. The limit doubles to $32,000 for married couples who file jointly and agree to split gifts on their taxes. You also have the option of front-loading a 529 plan and making five years’ worth of contributions all at once, without incurring gift tax.