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This bill amends the IRS tax code encouraging the use of 529 plans and Coverdell Education Savings Accounts. Sec. 201 in the bill allows all homeschool expenses to be considered “qualified education expenses” for Coverdell accounts. This bill applies to all homeschools that operate under applicable State law, and categorizes them as private schools for the purpose of funding.
Assigned to House Committee on Ways and Means
Assigned to House Committee on Education and the Workforce
A Coverdell account is an investment tool for parents seeking to save money for their children’s education related expenses, such as tuition, books, and supplies. This type of account is advantageous because its interest and distributions (withdrawals) are tax-free.
Unlike various government voucher programs, Coverdell’s are personal savings accounts that do not use government funds. Instead, a Coverdell operates analogous to a Roth IRA. That is, after-tax money is placed by an individual in their own account, where the money can grow, collect interest, and be withdrawn for eligible education expenses without additional taxes being paid. The Coverdell accounts can be used to pay for a child’s eligible education expenses. Currently, eligible expenses only include public and private school expenses. This means that only homeschool students in states which define a homeschool as a private school can use Coverdell accounts for educational expenses.
H.R. 716 would open Coverdell Education Savings Accounts to homeschool families by including homeschool expenses as an eligible educational expense. It is important to note once again, that the Coverdell accounts are not “vouchers” and do not represent government funds being offered to pay homeschooling expenses. Also important to note: the provisions laid out in Sec. 201 are completely unconnected to any Title I funding.
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HSLDA Policy Paper: “Homeschools and Education Savings Accounts”