Our kids, like most this time of year, are starting to stare and the calendar awaiting the start of another school year. Along with this time of anticipation is the stress of supplies to puchase and tuition to pay. No matter how old your child is or what school you are sending them to, it's expensive to educate a child. A local radio broadcaster this morning read the list of supplies required for a child in kindergarten. The list started with 2 boxes of tissues and ended with the kitchen sink - and that was for kindergarten. But, we must take responsibility for financially supporting our kids in school. So, what can be done to help pay these costs and what tax incentives are there to help defray some of these expenses? It is just a fact of life that the wallet is only so deep. So savings ideas in this area are very important.
SAVINGS IDEAS FOR SCHOOL SUPPLIES
Get With Your Friends - We have been homeschooling our kids since our 8th grader started. Now, my wife and I have 4 kids from 1st grade through 8th needing books, supplies, and other materials. We also have a lot of friends that homeschool too. My wife has always shared materials, books, and ideas with these families. A ton of money has been saved just using materials from other families that are in great shape where that family doesn't have a child using those materials this year. But, this isn't just a homeschool idea. In a great article on the Motley Fools site titled Back-to-School Savings, Elizabeth Brokamp gives a great idea for gathering last years schools supplies from all over the house and redistributing them to the other kids in the family in a play auction. Many of these supplies are not in bad shape, they are simply used a little. The kids just want something different. But, let us take this a step further. How about getting together with a couple of families and pooling your supplies for school. Then bring all the kids in and "auction" off the stuff. New to a kid really just means "new to me". I'm sure your kids are a lot like mine. They love to go to yard sales and pick up tons of treasures. They will drop a nickle or quarter in a second for some broken toy that looks fun to them simply because it has fun potential. Apply this same attitude towards school supplies. You don't have to buy new every year. It is absolutely easier just to grab a list and run to Wal-Mart. But, you don't need to drop $100 per kid each school year. Just be creative. In their hearts, the kids don't care that they are handed used goods. They just want something different this year. They get bored with the same folders year after year.
Tax Free Days - Another savings tool is utilizing the sales tax free days. This time of year, many governments have a few days where no sales tax is charged. For instance, in Louisiana, on August 3-4, no sales tax was charged on any items except vehicles, etc. that are titled. And, in Tennessee, no sales tax was charged August 3-5 on sales of items costing $100 or less. This could save you about $8 per $100 spent.
TAX INCENTIVES FOR EDUCATION
Homeschoolers Using the Educator Tax Deduction - In the State of Louisiana, parents that choose to homeschool their children can elect to operate as a private school. Under this option, the home school meets the definition of a school under state law. Therefore, these parents may qualify for a deduction of up to $250 for out-of -pocket expenses. To qualify, a parent/teacher just have spent at least 900 hours during a school year as an educator. Qualifying expenses under this legislation include expenses paid or incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials.
Education Savings Accounts - Regardless of the age of your kids, it is always a good idea to be setting aside funds to pay for their education. Parents can create a Coverdell Education Savings Account (ESA) for their children to finance qualified education expenses. Qualified expenses include fees, tuition, books, academic tutoring, supplies and equipment used in post-secondary, secondary, and elementary schools. The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.) Parents can contribute up to $2,000 per child per year to these accounts. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. That means that all the earnings on these accounts are tax free. Once again, homeschool families operating as private schools also qualify for these accounts. According to IRS Publication 970, a qualifying secondary or elementary school "is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law." Therefore, in the State of Louisiana, a homeschool operating under the private school option would be considered a school under state law and qualify. So start as soon as possible saving for your child.
The full text of IRS Publication 970 can be found online or in a downloadable pdf fomat. This publication contains a list of tax benefits with explanations on each. It is a good idea to scan this publication for ideas and then read in detail those parts of the publication that you think apply to you. And, then you can bring those ideas to your tax professional. Also, please feel free to e-mail me anytime with questions or ideas at Chip@CantrellCPA.net.
I really hope all of you have a great school year!
