August 16, 2002

New Tax Legislation May Provide Relief For Home Schoolers

U.S. Representative Bob Schaffer (R-CO) has introduced an ambitious pair of bills aimed at providing tax relief for families, including home educators, related to their educational expenses.

The Back to School Tax Relief Act of 2002 (H.R. 5193), allows families to partake of the $3,000 deduction currently available only for college expenses. Schaffer's bill would allow families of K-12 students, whose adjusted gross income is less than $40,000 (joint return, $20,000 for singles) to use the deduction for education expenses.

Another bill, the Education Freedom Act (H.R. 5192), allows persons contributing to education scholarship providers to claim a 50 percent tax credit of up to $250 or $500 for joint returns. Businesses will be able to claim a 50 percent credit of up to $50,000 for similar contributions. These scholarship organizations in turn award scholarships to students, including home schoolers. This system is particularly beneficial to families who do not have enough income to benefit from direct tax relief.

Tom Washburne, director of HSLDA's National Center for Home Education, said the bills are a forward-thinking approach to helping home educating families.

"Reducing the tax burden on families is an efficient way for the government to recognize that home schooling is good for children and ought to be encouraged, yet not regulated." Washburne said.

"Education can be expensive," Washburne added. "Home schoolers don't need the government to tell them what to do, but it is proper for the government to recognize the expenses incurred by home school families and to relax the tax burden on those families accordingly."

The Congressional Budget Office estimates the bill would "cost" $4.9 billion over 10 years. News reports indicate the House Ways and Means Committee is scheduled to mark up the bill in early September, and that it will be brought to the full House floor this Fall. Voting blocks are expected to form around traditional party positions on school choice matters.

In a related matter, President Bush signed into law the Job Creation and Worker Assistance Act of 2002 in March of this year. Along with numerous items intended to stimulate the economy, this measure contains a general tax deduction for teachers. Some Home School Legal Defense Association members have asked whether or not this deduction will extend to home schoolers.

The short answer: Not likely.

The long answer: While Section 406 of the new law would, in plain reading, apply to home schoolers, it is doubtful that the Internal Revenue Service (IRS) would recognize the deduction. Specifically, Section 406 provides a $250 deduction for the expenses of elementary and secondary school teachers. Although the term "school" seems to be defined broadly enough to include home schoolers, Section 406 amends a section of the tax code (26 U.S.C. Sect. 62(a)(2)) dealing specifically with the business deductions of employees. Since home schoolers are not school "employees," it is HSLDA's opinion that the deduction would not apply to them.

For more information on tax deductions that may be open to home schoolers, visit our web site at: http://www.hslda.org/docs/news/hslda/200202070.asp.