Esa

[Gary]

The TaxBook says, on pg 12-5, that an ESA distribution can be used for a school that provides K-12 education, and includes academic tutoring. Can this distribution be used for a child that is home-schooled but has a tutor for some of the subjects?

[Koss]

Probably

According to IRS Publication 970, for a Coverdell ESA, "qualified elementary and secondary education expenses" are defined as follows:

Qualified Elementary and Secondary Education Expenses

These are expenses related to enrollment or attendance at an eligible elementary or secondary school. As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. There are special rules for computer-related expenses.

1. The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school.

a. Tuition and fees.
b. Books, supplies, and equipment.
c. Academic tutoring.
d. Special needs services for a special needs beneficiary.

[Emphasis added.]

And while it might appear that the highlighted language would disqualify a home-schooled student, who presumably does not attend an eligible elementary or secondary school, this is probably not the case.

The operative word is OR. The expenses must be incurred in connection with attendance or enrollment.

Most home-schooled students are in fact enrolled with their local school districts, as home-schooled students. This allows the student to obtain a high school diploma from the school district, and it keeps the parents and the child in compliance, i.e., not violating truancy laws and other state laws that require children under 16 to be in school.

If your client's children are enrolled as home-schooled students at their local school district, then the expenses are probably qualified expenses. In fact, they can probably use the ESA funds not only for tutoring, but also for the cost of books and other educational materials. The parents probably aren't buying the materials from the school district, and the payments to the tutor aren't going to the district, either. But that's not what's required. I'll bet the school district requires that the parents choose, and purchase, an approved home-school curriculum, which means that the books and other stuff are required by the school.

Most home-schooled children are formally enrolled in a home-schooling program that is approved and monitored by the local school district. And this makes the expenses qualified.

There may be a few parents out there who are "off the grid," or flying under the radar. But I think it's pretty rare. You'll need to ask the right questions of your client.

BMK

[Gary]

Thanks

Thank you for your thoughts. I will ask the appropriate questions since the person involved is my grandson.

Gary