In some cases, tuition paid to private educational institutions is at least partially tax deductible. You can take a deduction for qualifying educational expenses as an adjustment to income or in the form of a credit against taxes owed, but not as an itemized deduction on Schedule A. This means that even taxpayers who only claim the standard deduction may still get a tax break for qualifying private tuition payments.
Which Institutions Qualify
Tuition to any eligible post-secondary educational institution (private, nonprofit or for-profit) qualifies for all current education tax credit programs. An eligible institution should provide you or the student with a Form 1098-T Tuition Statement. The student must be your dependent, for whom you claim an exemption on the tax return for the year in question.
Tuition paid to private elementary or secondary schools is excluded from the education credit deduction.
Adjustments to Income
Tuition and fees may be deducted as an adjustment to income for payments made to a qualifying post-secondary institution. You may claim up to $4,000 as long as your adjusted gross income is less than $80,000 ($160,000 for married filing jointly) and you do not file married filing separately and you do not claim another education credit for the same student for the same tax year. List the amount of tuition paid on Form 1040, line 34. You will also need to file Form 8917 (Tuition and Fees Deduction).
There are two main education credits available: American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC). They differ mainly in the maximum deduction allowed. These credits allow you to claim books and transportation as well as tuition and required fees.
For the AOC, the maximum is $2,500 per student per year for a maximum of four years while pursuing a first degree, and up to 40 percent of the credit may be refundable. The LLC can be used to claim a total of $2,000 per return with no limit to how many years you may qualify. This makes the credit useful for professional and nondegree-related education.
Maximizing Your Deduction
Determine the most advantageous deduction for your circumstance by consulting IRS Publication 970 Tax Benefits for Education. For a student pursuing her first college degree, the AOC is likely to offer the largest deduction, while for other situations, the LLC or the Tuition and Fees Deduction will give the higher deduction. Remember you can only claim a child's educational expenses if you also claim him as a dependent for the same tax year.
The worksheets for Form 8863 (Education Credits) can help you calculate the best choice for your particular tax situation and outlines additional limitations.
Child and Dependent Care Credit
While tuition payments to elementary or secondary private schools do not qualify for a tax break, if your child attends an after-school program at a private institution, you may be able to deduct the expenses on Form 2441 (Child and Dependent Care Expenses). Only programs which are not primarily educational in nature qualify and a portion of the expenses based on your adjusted gross income can be taken as a credit against taxes owed. Consult IRS Publication 503 for specifics.