What tax benefits exist for K–12 education?
While the vast majority of education tax benefits target higher education, two types of federal tax breaks are aimed at K–12 education: tax credit bonds for school construction and reimbursement to teachers for school-supply expenses.
Tax Credit Bonds for School Construction
Created in 1997, the Qualified Zone Academy Bond (QZAB) program provides funds for renovations to existing buildings, equipment, curricula development, and training. The program was expanded in 2009 by the American Recovery and Reinvestment Act (the fiscal stimulus package), which also introduced the Qualified School Construction Bond (QSCB) program. Like the QZAB, the QSCB program funds renovations, but it also supports new construction.
Under these programs, the bonds cost the school or the school district issuing them little or nothing because bond holders are paid in federal tax credits in lieu of interest. In both 2009 and 2010, the QZAB and QSCB programs allocated $1.4 billion and $11 billion, respectively, to fund payments on qualifying bonds. Since 2010, QZAB annual allocations have returned to their initial levels of $400 million annually. The 2010 Hiring Incentives to Restore Employment (HIRE) Act introduced a direct pay option in which the federal government makes payments directly to certain bond issuers under QZAB and QSCB to cover bond interest, rather than providing credits to the bond holders.
Educator expense deduction
Teachers can deduct up to $250 annually ($500 for married couples where both spouses are teachers) for unreimbursed expenses on supplies. The deduction covers expenses on books, computer equipment, supplementary materials, and other school supplies and will cost an estimated $210 million in 2017.
Internal Revenue Service. 2016. “Qualified Zone Academy Bond Allocations for 2015 and 2016.” Notice 2016-20. Washington, DC: Internal Revenue Service.
———. 2015. “Topic 458 – Educator Expense Deduction.” Washington, DC: Internal Revenue Service.
US Department of Education. 2009. “Key Policy Letters from the Education Secretary or Deputy Secretary.” May 29. Washington, DC: US Department of Education.
US Department of the Treasury. 2016. “Tax Expenditures – FY 2018.” Table 1. Washington, DC: US Department of the Treasury.