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K–12 Education Subtraction and Credit Individual Income Tax Fact Sheet #8
This fact sheet is also available in a printer-friendly English version and Spanish version. You will need Adobe Reader to view and print this document.
The amount of your subtraction or credit is based on the actual qualifying expenses you paid during the year for your child’s K–12 education—for which you have documentation—up to the maximums allowed by law. This fact sheet covers who qualifies for the subtraction or credit or both, what educational expenses qualify for each, and which forms need to be filed. Required documentation To claim either the K–12 education subtraction or credit, you must have documentation—such as itemized cash register receipts and invoices—to prove any specific qualifying expense. Canceled checks alone may not be sufficient proof as to what you actually purchased. Also, be sure to save your receipts and other documentation; you may be asked to make these available to the department for review. Keep in mind that the subtraction and credit may be claimed only to the extent of your actual expenses, and you cannot use the same expenses to claim both the subtraction and the credit. We may require additional information, including the name of the organization or the qualified instructor to whom you paid fees for classroom or individual instruction. Eligibility requirements To claim either the subtraction or credit, you must have paid qualifying expenses during the year to help your qualifying child’s K-12 education. Part-year residents and nonresidents may also qualify for both the subtraction and credit. What is the subtraction and who qualifies? If you purchased educational material or services for your child’s K–12 education, you may be able to subtract your qualifying expenses, up to the maximum amounts, from your taxable income when you file your Form M1. Unlike the education credit, there is no income limit to qualify for the K–12 education subtraction, and you may qualify regardless of your filing status. However, the school your child attended must be located in Minnesota, Iowa, North Dakota, South Dakota or Wisconsin. What is the credit and who qualifies? The education credit is a refundable credit that reduces your state income tax liability. If you meet the eligibility requirements provided below, you may claim a credit on your Form M1 equal to 75 percent of your qualifying expenses that you paid during the year for your child’s K–12 education, up to the maximum amounts. (Prior to 2002, the amount of your K–12 education credit was 100 percent of your allowable expenses rather than 75 percent.) To qualify for the education credit, you must file as single, head of household, qualifying widow(er) or married filing a joint return. Married persons filing separate returns do not qualify for the credit. In addition, your household income—your federal adjusted gross income plus most nontaxable income—must be below a certain limit for the year. The limits changed in tax year 2005. Beginning with tax year 2005. To qualify for the credit, your household income must be under a certain limit based on the number of qualifying children you have in grades K–12.
For years prior to 2005. To qualify for the credit, your household income must have been less than $37,500. Qualifying child A qualifying child must meet the definition of a qualifying child for the federal earned income credit and must have been in grades K–12 during the year. In other words, to qualify for either the subtraction or credit, the child must have lived with you in the United States for more than half of the year, been in grades K–12 during the year, attended a public, private or home school and must be:
Qualifying expenses In general, expenses that qualify for either the subtraction or the credit include:
Qualifying expenses that apply only for the subtraction include private school tuition and tuition paid for college or summer school courses that are used to satisfy high school graduation requirements. Expenses that do not qualify for either:
Fees paid for instruction or tuition Expenses that qualify for either the subtraction or the credit include fees and expenses paid for instruction or tuition taken outside the regular school day or school year for which your child is not required to attend, such as:
To be a qualified instructor, the person must meet one of the following requirements:
Required school materials Generally, most expenses paid for required materials used for educational instruction during the regular school day or school year qualify. The material must be used in teaching subjects normally taught in public schools in grades K–12. Qualifying expenses include:
Do not include:
Transportation costs paid to others The only qualifying transportation expense is the amount you paid to others to transport your child to and from school or for field trips during the normal school day. However, to claim this expense as a subtraction or a credit, your child must have attended a school located in Minnesota, Iowa, North Dakota, South Dakota or Wisconsin. Do not include costs for you or other members of your household to drive your child to school, the cost to transport your child to or from day care, or to any program or camp that is not part of the normal school day. Also, you cannot include any travel expenses for overnight class trips. Computer hardware and educational software Personal computer hardware purchased during the year for use in your home qualifies, as long as it is not used in a trade or business. Examples of qualifying hardware can include a personal computer, printer, monitor, CD-ROM drive, modem, additional hard drives, memory upgrades or adaptive equipment for students with disabilities. Software must have a clear educational purpose—computer games without educational value do not qualify. Software purchased to access the Internet qualifies. However, the monthly charges to a service provider for Internet access do not qualify. For limits to the computer expenses you may claim, see Limits to computer expenses. The table below shows examples of expenses that may qualify for the education credit and/or subtraction.
The year in which the payment was made determines when an expense qualifies. If the educational service or material was received in a year different than the year of payment, you may only claim the qualifying expense for the year in which the payment was made. This is true for both the education subtraction and credit. Determining year of payment for financed expenses If you receive a loan from your local bank or you use a VISA, MasterCard, AMEX or other third-party credit card to pay your qualifying expenses, your expenses are considered fully paid when you make the initial purchase. However, the opposite is true if you purchased a qualifying expense on credit directly from the retail vendor. In this case, your purchase is not fully paid when you make the initial purchase. Rather, each payment you make to the vendor is considered a separate expense. Example 1. Tammy bought a computer several years ago on credit using her VISA credit card, and she’s still making payments on this purchase. In this case, because her initial purchase was made several years ago, it does not qualify for a credit or subtraction on this year’s income tax return. Example 2. Charles received a loan from his local bank to pay educational expenses for his children. The expenses are considered to have been paid in the year they were made, regardless of when Charles paid back the loan. Example 3. Last October, Don purchased a computer on credit directly from the computer store, and has made two payments during the year. Don may only include the amounts of the two payments, up to the maximums allowed, as qualifying expenses. Example 4. Rita’s daughter took tutored classes in the fall, but she didn’t pay for the classes until January of the next year. For both the subtraction and credit, Rita’s qualifying expenses must be claimed in the year in which the fee is paid, not when the class is taken. Limits Subtraction limits You may subtract your actual qualifying educational expenses, up to a maximum of $1,625 per qualifying child in grades K–6, and $2,500 for a qualifying child in grades 7–12. In the case where a child went from 6th grade to 7th grade during the calendar year, the maximum for that child is $2,500. There is no family maximum subtraction, only a per-child maximum. Credit limits Your credit is limited to 75 percent of your qualifying expenses that you paid during the year for your qualifying child’s K–12 education, up to the maximum amounts. The remaining 25 percent of qualifying expenses cannot be used to claim the subtraction. (Prior to 2002, you were able to claim up to 100 percent of your qualifying expenses.) Beginning with tax year 2005, the maximum credit you may claim is based on your household income and the number of qualifying children you have in grades K–12. Your maximum credit limit will be determined when you complete Schedule M1ED, K-12 Education Credit. For years prior to 2005: If your household income is $33,500 or less, the maximum credit you may claim is $1,000 per child and $2,000 per family. In no case will your credit be more than $2,000. If your household income is from $33,501 to $37,499, the maximum credit is reduced. Your maximum credit limit is determined when you complete Schedule M1ED. Limits to computer expenses If the qualifying computer expenses for your family exceed $200, the most you can claim is:
How to claim the subtraction and/or credit Education subtraction To claim the education subtraction, determine the amount of your qualifying expenses and fill in the amount on the appropriate line of your Form M1. Keep in mind that your subtraction must be based on your actual expenses during the year for which you have proof to substantiate your claim, such as cash register receipts and canceled checks. You are not required to submit the documentation with your return, but you are required to show it if requested by the department. Note: If you qualify for the subtraction and your household income is less than the income limit for the K–12 education credit, it is to your advantage to first determine your credit. Once your credit limits are reached, you may take the balance of your qualifying expenses, if any, as a subtraction. Education credit To determine your education credit, complete Schedule M1ED. Enter your credit amount on the appropriate line of your Form M1. You must include your completed Schedule M1ED when you file your Form M1. If your credit is limited by the maximum amounts, you can then use the remaining qualifying expenses to claim the subtraction, up to the limits you can subtract. However, you cannot claim both the subtraction and credit using the same expenses. Also, even though your credit is limited to 75 percent of your qualifying expenses, you cannot claim the remaining 25 percent as a subtraction. Penalty for fraudulently claiming a refund If you file a return that fraudulently claims a credit or refund, including the K–12 education credit, you will be assessed a penalty. The penalty is 50 percent of the fraudulently claimed refund. Questions you may have I home school my child. Am I eligible to claim the subtraction and credit? As long as your qualifying child is in kindergarten through 12th grade, it doesn’t matter if he or she is attending a public, private, parochial or home school—you may claim your qualifying expenses. As a home school, you must annually report information regarding your program with your local public school district and your program must meet the reporting requirements of Minnesota’s compulsory attendance laws. For more information about qualifying home school expenses, see Fact Sheet 8a, Qualifying Home School Expenses. My child’s Social Studies class is taking a trip to Washington, D.C. to study our national government. What expenses qualify? The amount paid for instruction qualifies if it is provided by a qualified instructor. Travel expenses, lodging and meals do not qualify. Can I claim expenses for my son who graduated from high school and entered college during the year? Yes, but only the qualifying education expenses paid for the time he was in the 12th grade. Can I claim the full fee for sending my child to an academic camp? No, only the fee paid for instruction at the camp qualifies. However, for the instruction fee to qualify, your bill must separately list the qualifying expense (instruction fee) from the non-qualifying expenses, such as food, lodging and transportation. My daughter is taking dance classes from a qualified instructor. Do the fees qualify? Yes, fees paid for performing arts instruction qualify. For more information Information and forms are available on our website at www.taxes.state.mn.us, or you may call us at 651-296-3781 (Metro) or 1-800-652-9094 (Greater Minnesota). This fact sheet is intended to help you become more familiar with Minnesota tax laws and your rights and responsibilities under the laws. Nothing in this fact sheet supersedes, alters or otherwise changes any provisions of the tax law, administrative rules, court decisions or revenue notices.
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