Education Tax Deductions


Q: Does the IRS allow parents to deduct their dependents’ tuition and any related expenses if they attend parochial school?
— P. Briggs, Millburn, NJ

A: Unfortunately, the answer to your question has a few conditions. According to the IRS, “Tuition for primary or secondary school education is neither deductible as an education expense, nor as a charitable contribution.” Furthermore, the IRS says you cannot take a charitable deduction for tuition, even if you pay for children to attend parochial schools or qualifying nonprofit daycare centers.

But while you can’t write off your child’s parochial school education as a deduction, you can get some tax benefit by establishing a Coverdell Education Savings Account (formerly an Education IRA) for a dependent child under the age of 18. The Coverdell is a custodial account that pays qualified education expenses for a designated beneficiary. If you are a taxpayer whose modified adjusted gross income is less than $110,000 for 2003 ($220,000 if married/filing jointly), you can establish this account for as many beneficiaries as you wish, allowing you to contribute up to $2,000 per year that will grow tax-free. You can then use the tax-free distributions from Coverdell accounts to pay qualified expenses, such as tuition or books, for public, private, and religious elementary and secondary school expenses.

For complete details on the benefits of the Coverdell and other questions related to education benefits, see IRS Publication 970 Tax Benefits For Education (www.irs.gov/pub/irs-pdf/p970.pdf).


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