Tax Breaks for Tuition Paid at Private Schools

After you graduate, you can deduct student loan interest.

If you paid private school tuition either for yourself or one of your dependents, you may be eligible for tax breaks including credits and deductions. However, you or your dependent must have a high school diploma or equivalent. In other words, federal tax breaks are only available for higher education, not high school and lower. Your state may offer tax breaks for private high school and grammar school tuition, so you might wish to check with your state to see what breaks are available.

Qualifying

To qualify for tuition deductions and credits, you must have paid tuition using your own money. If you paid tuition using student loan, grant or scholarship money, you cannot write off tuition or use an education tax credit. While you can write off expenses you paid for your dependent, you cannot write off expenses if someone else claims you as a dependent.

Deductions

You can deduct up to $4,000 per year in private school tuition and qualified expenses each year. Qualified expenses include student fees, books, school supplies and equipment you use primarily for school, such as your computer. Tax deductions reduce your taxable income, not your taxes. For example, if you earn $100,000 and you qualify for a $4,000 deduction, your taxable income is reduced to $96,000.

American Opportunity Credit

If you choose to deduct tuition and other expenses you paid, you are required to itemize, or list each expense individually. Education tax credits offer an alternative that may save you time and money. The American Opportunity Credit allows you to reduce the amount of taxes you owe by up to $2,500 per year. If you take an education credit you cannot also take tax deductions on tuition.

Lifetime Learning Credit

The American Opportunity Credit can only be used if you or your dependent are in undergraduate school at an accredited university. The Lifetime Learning Credit is available for both undergraduate and graduate school as well as some nonaccredited schools, such as private vocational schools. This credit allows you to reduce your taxes by up to $2,000 per year, depending on how much you personally qualify for.

References

• HSBC Private Bank: US Private School Tuition - Tax Deductible?
• IRS.gov: Tax Benefits for Education

Resources

• IRS.gov: Tax Benefits For Education