Taxes From A To Z (2018): P Is For Private & Parochial Schools

It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim home office expenses or whether to deduct a capital loss, you won’t want to miss a single letter.

P is for Private and Parochial Schools

Typically, the costs of attending private or parochial kindergarten or higher grades are not deductible for federal income tax purposes.

However, expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are deductible for federal income tax purposes of the child care tax credit if those expenses otherwise qualify as childcare. I believe that if you can clearly carve out a childcare piece associated with attending kindergarten, that portion should also be deductible. However, the Internal Revenue Service (IRS) believes that kindergarten is always educational, so rebutting this presumption would be very fact dependent.

What about expenses associated with attending private and parochial schools, like uniforms? The IRS does not allow deductions for school uniforms, even if required, for parochial or private schools (ditto for public schools). However, the rules are slightly different at military school: If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms but you can deduct the cost of insignia, shoulder boards, and related items.

With all of that said, some taxpayers have suggested that the way to get around those rules is to deduct tuition or related costs, as charitable contributions on Schedule A. The IRS has taken a clear position that you can’t deduct as a charitable contribution amounts you pay as tuition. This is true even if you posit (as many taxpayers have attempted) that you are benefiting the school/charity with your tuition dollars or that you are taking the burden away from local government by not taking a “spot” in the public schools which you support with your tax dollars.

There is some good news: Following tax reform, up to $10,000 of 529 savings plans can be used per student for public, private, and religious elementary and secondary schools. Neither the earnings nor distributions in 529 plans are taxable for federal purposes so long as the plan is used for costs like tuition, room and board, fees, books, supplies, and equipment.
For your taxes from A to Z, here’s the rest of the series: