State Credits

• Minnesota, Illinois and Louisiana have passed laws allowing for the deduction of qualified educational expenses on the taxes of parents who home-school. Depending upon the explicit definition, such expenses can be considered to include the cost of educational materials, field trips and the like. As with any tax deduction claim, be prepared to prove its legitimacy in the event of an audit.
  
  

Business Expenses

• Businesses qualify for a broad set of tax deductions, but home-schooling doesn't fall into that category. You could create tax deductions if you decide to open an ancillary business like private tutoring or accepting other families' children as students. Taking on other students, however, opens a can of regulatory madness that might not be worth the hassle involved. And even if you choose to open a teaching-related business, tax breaks can only be claimed for expenses related to that, not to the home-schooling of your child.
  
  

Nonprofit Status

• Most people are aware of that fact that donations to nonprofit organizations are tax-deductible. Whether you want to go to the trouble of creating such an organization around home-schooling activities is entirely up to you. Regulators pay close attention to the way nonprofits are set up and administered. Before going this route, have a clear understanding of the ramifications. Once you obtain nonprofit status, you would have a whole new set of tax benefits available.
  
  

Considerations

• There also is a $250 federal tax deduction for teachers who use their own money to purchase educational items. Thus far, it has been an iffy area whether the IRS allows home-schoolers to claim the benefit. IRS statute language requires that to take the deduction you must have worked 900 hours in a state-approved elementary or secondary education system. Since "work" means to get paid, and you have no W-2 to show for it, claim this deduction at your own risk and don't be surprised if you're audited.