Navigating Private High School Tuition: Tax Deductions and Savings Strategies

As school choice gains momentum, families are exploring ways to make private K-12 education more affordable, particularly through the tax code. While the landscape of tax benefits for private education can be complex, understanding the available options is crucial for parents considering this path. This article aims to provide a comprehensive overview of the current state of private high school tuition tax deductibility, available savings plans, and state-specific programs.

Federal Tax Landscape: No Direct Deduction for Private School Tuition

Currently, there is no federal tax relief for private K-12 educational expenses, as most federal tax credits and deductions for education are related to higher education. This means that, unlike some expenses related to higher education, you cannot directly deduct private high school tuition from your federal taxes. The federal government also does not offer a tax credit for parents who fund private school tuition. However, there are indirect ways to potentially leverage the tax code for educational savings.

Tax-Advantaged Savings Plans

While direct deductions for tuition are unavailable, the federal government offers two primary tax-advantaged savings plans that can be used for K-12 private school expenses: Coverdell Education Savings Accounts (ESAs) and 529 Education Savings Plans.Families who know early on that they want to send a child to a private K-12 school may want to meet with a financial planner, accountant or education consultant to create a budget and a plan. Often, those conversations will include a discussion of saving through tax-advantaged accounts.

Coverdell Education Savings Accounts (ESAs)

A Coverdell ESA is a savings account that allows you to save for a child's education expenses. Parents of students not enrolled in public schools can contribute up to $2,000 each year to a Coverdell account with tax-free interest. The Coverdell ESA is a preferred option to a regular savings or investment account since the interest is tax-free for parents who know they’ll send their student to a private school. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law.

Contribution Limit: The maximum contribution per year for any single beneficiary is $2,000.
Income Limits: Coverdell ESAs are only available to families who fall under a designated annual income level (modified adjusted gross income of $220,000 for joint filers and $110,000 for single filers).
Age Requirements: Coverdell ESA beneficiaries must be 18 or younger when the account is established. Funds must be used by the time a student is age 30 or taxes, fees and penalties will accompany withdrawals.
Distributions: Coverdell ESAs have no limit on how much can be withdrawn annually, and the money can be used for many K-12 expenses, not only tuition.
Tax Advantages: Contributions are not deductible. Earnings (interest) are not taxed if distributions are used for qualified education expenses.Nevertheless, Coverdell ESAs may expose investors to troubling fees and hidden charges depending on the provider and account balance.

529 Education Savings Plans

A 529 Education Savings Plan is a tax-advantaged savings plan designed to help pay for education. Originally limited to post-high school education costs, 529 plans were expanded to include K-12 education in 2017. Although they take their name from Section 529 of the federal tax code, the plans are administered by the 50 states and the District of Columbia. Families can withdraw up to $10,000 annually or the cost of tuition - whichever is less - from the 529 account per year.

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Contribution Amounts: For 529 plans, there is no annual contribution limit, but many parents cap annual contributions at $15,000 per year to avoid the federal gift tax.
Income Limits: For 529 plans, there are no restrictions on the income level of contributors.
Age Requirements: 529 plans do not have age requirements for establishing the plan or for withdrawing plan funds.
Tax Advantages: Contributions are not tax-deductible for federal income tax purposes, but more than 30 states provide tax deductions or credits of varying amounts for contributions. Rules vary by state.
Distributions: Families can withdraw up to $10,000 annually or the cost of tuition - whichever is less - from the 529 account per year.

State-Level Tax Relief Programs

Some states offer families limited tax relief for K-12 private school expenses. As of now, eight states (Alabama, Illinois, Indiana, Iowa, Louisiana, Minnesota, South Carolina and Wisconsin) offer private school choice programs known as individual tax credits and deductions, and Ohio will begin offering them this year, according to EdChoice, a nonprofit that works to advance school choice. Hundreds of thousands of taxpayers participate in these state-based programs each year and save from $100 to $10,000, based on the state’s program and the family’s income. Nationally, higher-income families with greater tax liability benefit more.

Individual K-12 Tax Credits and Deductions: A lesser-known tax break that is available to families in many states are the various individual K-12 tax credits and deductions. The programs are popular too, as every year, hundreds of thousands of taxpayers in these states claim credits on qualified expenses they made for their child’s education.
Refundable Tax Credits: In recent years, refundable tax credits have emerged as a model allowing families to receive tax credits for not only tuition but also other private educational expenses such as tutoring costs, textbook expenses, curriculum costs, and fees for nationally standardized assessments.
State-Specific Examples:
- Oklahoma Parental Choice Tax Credit: All Oklahoma students are eligible for a refundable tax credit under the Oklahoma Parental Choice Tax Credit program, provided they have education expenses at an accredited private school or are “educated by other means”.
- Idaho residents: All Idaho residents who are 18 or younger are eligible to participate.
- Wisconsin: As a result of advocacy by WCRIS, state law allows Wisconsin parents to deduct private school tuition on their taxes. It’s important to remember that this is tax deduction, not a tax credit. Only the amount paid after January 1, 2024 will qualify for the deduction. A Schedule PS form should be filed with your state tax return. Families are to submit the student’s name, social security number, grade, school ID number and tuition paid. The deduction can only be used for tuition paid out by the parent or guardian. Fees for extracurricular activities, uniforms, school supplies, meals, transportation, etc.

Special Needs Students

If your child is attending a private K-12 school because they have special education needs, you may be able to get a tax break on the tuition. The deduction requires a physician’s referral. For 2025, 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 2025 is $15,000 for single filers and $30,000 for married couples filing jointly. Comparing the standard deduction against your estimated itemized deductions can help you to decide which one to claim.

Additional Strategies for Saving on Private School Tuition

Beyond tax benefits, there are other ways to potentially reduce the cost of private school tuition:

Financial Aid: 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.
Payment Plans: 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.
Scholarships and Grants: Explore scholarship and grant opportunities offered by private organizations or the school itself.
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 map out a strategy for covering those expenses while keeping tax planning in sight. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you.

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.

American Opportunity Tax Credit: The American Opportunity Tax Credit is available for students who are in their first four years of higher education.
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.
Student Loan Interest Deduction: If your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education.

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.

The Nuances of State Tax Relief

EdChoice data shows big differences in participation rates. The organization doesn’t have information to explain this variation, or survey data to show whether people participating would otherwise have been able to afford private school, says Jason Bedrick, director of policy for EdChoice. “Of course, basic economics tells us that larger scholarship sizes are more likely to help more people, and vouchers, tax-credit scholarships and K-12 education savings accounts are therefore more likely to be effective at helping a larger number of people fulfill their K-12 education preferences,” Bedrick says. Moreover, individual tax credits don’t help lower-income families, who have little to no tax liability, unless the credits are refundable, meaning families can claim the full value of the credit as a refund on their taxes, even if they did not have a tax liability, Bedrick says.

Maximizing Tax Benefits for Work-Related Education

If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2% of your adjusted gross income. If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Your work-related education expenses may also qualify you for other tax benefits, such as the the American opportunity credit, tuition and fees deduction and the lifetime learning credit. You may qualify for these other benefits even if you do not meet the requirements listed above. You can deduct the costs of qualifying work-related education as business expenses. The education is required by your employer or the law to keep your present salary, status or job. Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work.

Qualified Tuition Programs (QTPs) and Prepaying Education Expenses

States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. You can't deduct either payments or contributions to a QTP. No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Qualified expenses include required tuition and fees, books, supplies and equipment including computer or peripheral equipment, computer software and internet access and related services if used primarily by the student enrolled at an eligible education institution.

Scholarships and Fellowships

A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate. A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. You may exclude certain educational assistance benefits from your income. That means that you won’t have to pay any tax on them.

Read also: Private School Affordability

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