Most professionals who get involved with private education do so out of a dedication to helping future generations – not a passion for tax paperwork.
Yet, it’s important to stay aware of relevant rules as they apply to private school tax forms, as they impact the ability of families to afford tuition and the non-profit status of independent schools.
Private School Tax Forms
K-12 private and independent schools must adhere to federal tax laws to preserve their tax-exempt status. This annual obligation involves completing various forms, two of which are particularly important.
Used to determine if your institution indeed qualifies for 501(c)(3) eligibility, Form 1023 is required to receive any federal income tax exemption. Approval will take the form of a determination letter from the Internal Revenue Service (IRS), which will officially certify a school as a nonprofit, allow it to collect charitable donations, and determine annual contribution amounts. Filing within 27 months of formation allows schools to retroactively receive nonprofit status for the months before application approval.
Form 1023 may classify a school as a nonprofit, but even tax-exempt organizations must continue to annually file with the IRS. With Form 990, the IRS collects financial information from tax-exempt organizations to ensure ongoing compliance and encourage them to publicly share the health of their programs. There are many states that also use Form 990 to ensure operational and tax compliance for nonprofits operating within their borders. This form relies on calculating gross receipts over the past year, which for private schools combines the total tuition, grants, and donations received.
Family-Side Tax Forms
Unfortunately, most families cannot write off their kids’ private school tuition when filing taxes, but there are additional options you can share with school families to help with expenses. There are few school-related tax forms for parents to worry about, but the following are options to better finance private school expenses.
When Are Families Eligible for Tax Deductions?
Just like with public K-12, having children attend private school does not create tax-break opportunities. At the federal level, tuition is not classified as an item that can be expensed from taxes owed.
The only exception: a child attending private school for students with special needs may qualify for tuition or tax deduction, provided a physician has certified the child requires this specialized education.
Coverdell Education Savings Account (ESA)
Similar to using a Health Savings Account for medical expenses, an ESA is an option for families to cover education-related expenses. Acting as a trust, ESA accounts are not tax deductible but do allow families to use investment earnings for qualified expenses, such as the following.
- Tuition
- Textbooks
- Room & board
There are contribution limits across all accounts made in a child’s name ($2,000 per year). Account owners will annually receive Form 1099-Q in time for tax season.
Qualified Tuition Plan (QTP)
Also known as a 529 Plan, a QTP is a state-administered investment account aimed to assist contributors with qualified tuition payments. Earnings from these accounts are tax free while still in the account, and any distributions don’t need to be reported as income, so long as they are only spent on educational tuition.
QTPs also report all relevant financial information on an annual Form 1099-Q.
States with Vouchers
Many states offer vouchers to families, which are essentially publicly funded stipends that help pay the cost of education, giving parents more options when it comes to their children’s education.
A handful of states have a private school choice program in place available to all K-12 students in the state. Here’s the state-by-state breakdown.
- Alabama
- Arkansas
- Arizona
- Florida
- Indiana
- Iowa
- Montana
- North Carolina – The state’s education authority made awards to 54,000 new students for the 2024-25 school year.
- Ohio
- Oklahoma
- Utah
- West Virginia
Many additional states (plus Washington DC and Puerto Rico) also offer similar voucher programs for less general scenarios. Georgia is set to launch its own program, which will serve roughly 21,000 students.
Continuing Financial Compliance: Secure Payments
Private school tax forms and tuition assistance are only one side of financial compliance. Combining the two requires a secure payments solution that abides by the highest cybersecurity standards.
With Diamond Mind, schools collect tuition, admission fees, donations, summer program registration fees, and more under a PCI-compliant suite of highly secure solutions.