Ask An Expert: What’s the Minnesota K-12 Education Credit?

My name is Alejandro Valenzuela, and I recently joined Prepare + Prosper as our new Tax + Financial Services Director. This is my first time writing an Ask an Expert article, but I have lots of experience in VITA/free tax prep, financial capability, and asset building. I’ve worked as the financial services manager at CAPI USA (which supports immigrants and refugees around economic independence and self-determination), and managed the asset building and financial empowerment programs for Community Action Partnership of Hennepin County and Comunidades Latinas Unidas en Servicio (CLUES). In both of those roles I launched several programs, including VITA services and lending circles through a partnership with Mission Asset Fund. I am an expert, and I am excited to share my expertise through this article. Since school is starting soon, I have one big piece of advice for families with school-age kids:

Save your receipts from back-to-school preparation!

As families gear up for school this fall, it’s valuable to keep track of the purchases made for your child’s education. Whether your family is doing some in-person classes, or full at-home schooling, that supply list is always long. Depending on your particular situation, your family may qualify for Minnesota’s K-12 Education Credit or K-12 Education Subtraction, which can increase your tax refund or lower your tax liability. Saving your receipts for classroom materials like notebooks, art supplies, textbooks, or special equipment like musical instruments or calculators this fall can potentially make your tax situation more favorable come spring. This article will cover what the K-12 Education Credit and K-12 Education Subtraction is, what qualifies families for the Credit or Subtraction, and what families need to have ready when they file their taxes.

What is the K-12 Education Credit and K-12 Education Subtraction?

Minnesota has two tax relief programs designed to offset educational expenses, aiming to support the education of the next generation. While both can lower tax liability, the Credit and Subtraction do different work. The Credit is a refundable tax credit, which reduces your tax liability and can increase your tax refund. The Subtraction acts to reduce your taxable income, which can lower your tax liability.

For either, you must have:

  • a qualifying child (the IRS defines “qualifying child” on their website)
  • paid qualified education expenses (which I define later in this article) over your child’s year of education, and
  • kept documentation of your purchases by saving receipts and/or invoices.
Does my family qualify for the K-12 Education Credit?

The K-12 Education Credit has income limits depending on the number of children you claim, and requires that your filing status is not “Married Filing Separate.” If you have 1 or 2 children, the income limit is $37,500. For each additional child you claim, the income limit increases by $2,000. For example, if you claim 4 children, the income limit is to $41,500. For tax year 2020, the maximum K-12 Education Credit is $1,000 per child, certainly having a significant impact on your tax situation.

Does my family qualify for the K-12 Education Subtraction?

The K-12 Education Subtraction does not require a specific filing status, and does not have an income limit. Instead, the Subtraction sets maximum subtractions on your taxable income based on your child’s grade level. If your child or children are between kindergarten and 6th grade, you may subtract up to $1,625 in education expenses for each child. If they are between 7th and 12th grade, you may subtract up to $2,500 for each child. These subtractions are taken from your income total, reducing the portion of your income which is taxed.

What counts as a “Qualifying Expense”?

The K-12 Education Credit and Subtraction both seek to address the investments you make in your children’s education, but each specifically cover certain expenses. For example, both the Credit and Subtraction accept up to $200 in educational computer hardware and software meant to further your child’s education at home, but monthly payments for your internet connection do not qualify. Below is a table of common qualifying expenses. If you would like to learn more, this fact sheet provided my the Minnesota Department of Revenue thoroughly covers qualifying and nonqualifying expenses. You may not claim the same expense for both the Credit and Subtraction, even if it qualifies for both.

Expense Subtraction Credit
School supplies (like textbooks, calculators, or art supplies that will be used in class) Yes Yes
Private school tuition Yes No
Educational computer hardware and software Yes, up to $200 Yes, up to $200
Extracurricular academic or fine arts classes (like dance, music lessons, art, or science) Yes Yes
Tutoring for K-12 subjects taught by a qualified instructor (who is not a family member of the child) Yes Yes
 

Academic summer camps

 Yes, but it is limited to the portion of tuition used for instruction. It cannot include room and board. Yes, but it is limited to the portion of tuition used for instruction. It cannot include room and board.
Rental or purchase of musical instruments for school classes Yes Yes
Educational school field trips taken during the school day Yes Yes
Remember, save your receipts!

Without proper documentation showing that you made purchases for your child’s education, you cannot receive the either K-12 Education Credit or Subtraction. As you prepare your family to go back to school, be sure to collect your receipts and store them away for your future self. Come tax-time, you’ll be glad you did.

*Photo was taken in pre-COVID-19 times.