by Jason Loven, CPA, CCIFP®
School Supplies and Tax Benefits
From hefty textbooks and shiny band instruments to multi-colored pens and sleek notebooks, the back-to-school shopping list can quickly add up. This year, as you outfit your children for learning, keep these tax benefits in mind: Minnesota’s K-12 Education Subtraction and the K-12 Education Credit. The subtraction (i.e., deduction) and credit are available to help you offset the cost of school supplies and other related expenses for children enrolled in kindergarten through 12th grade. All you need is to save your receipts.
Here’s what you should know about these valuable tax benefits.
Which school-supply expenses qualify?
Generally, any expense related to supplies, materials, or equipment that are required as part of school curriculum may qualify. Examples include:
- Paper and notebooks
- Pens and pencils
- Nonreligious textbooks
- Rentals or purchases of educational equipment, including musical instruments and art supplies
- Computer hardware and educational software (up to $200 for the deduction, $200 for the credit)
- After-school tutoring and educational summer camps taught by a qualified instructor
- Private school tuition (qualifies for the subtraction only)
It’s important to note that expenses incurred by extracurricular activities, such as playing on the school’s basketball team, typically do not qualify.
Should you apply for the subtraction or the credit?
Taxpayers are not permitted to qualify for both the subtraction and the credit; you must choose one. That said, your choice will largely depend on your income level: the credit is available only to taxpayers whose household income falls below a certain threshold.
For instance, taxpayers with one to two K-12 children must have a household income of less than $37,500 to qualify for it. The credit is a dollar-for-dollar credit against your tax bill; however, it is limited to $1,000 per child or 75% of qualifying expenses, whichever is less.
The subtraction, on the other hand, does not carry an income limit. The amount of your subtraction will depend on your qualifying child’s grade level at the end of the tax year:
- Kindergarten through 6th grade: $1,625
- Seventh through 12th grade: $2,500
- 12th grade and started college during the tax year: $2,500
What if your qualifying child attends school outside of Minnesota or at home?
You may still qualify for the subtraction or credit, even if your child attends school in one of these other states: Iowa, North Dakota, South Dakota, or Wisconsin. You may qualify if you homeschool your children, too.
What should you do now?
If you’d like to take advantage of the K-12 subtraction or credit, it’s simple: save your back-to-school shopping receipts and invoices. Cancelled checks may not suffice if the Minnesota Department of Revenue were to request a review. You can apply for the subtraction or credit when you file your 2021 tax return.