How to Claim the Minnesota K-12 Education Tax Credit and Subtraction

Minnesota offers two separate tax benefits for families paying for K–12 education outside the public school system: the K-12 Education Subtraction and the K-12 Education Credit. They are different mechanisms with different limits, different eligibility rules, and they are claimed using different forms on your Minnesota state tax return. Understanding which one applies to your situation — and which expenses actually qualify — is worth getting right. Together they can reduce your state tax liability by thousands of dollars per year.

This post explains both benefits, how to figure out which one you qualify for, what receipts you need to keep, and where the claim appears on your return.

The Two Benefits: Subtraction vs. Credit

The K-12 Education Subtraction reduces your Minnesota taxable income. You subtract qualifying expenses from your gross income before calculating what you owe. There is no income limit — any family with qualifying expenses can claim it regardless of how much they earn.

The maximum subtraction is:

• $1,625 per child in grades K–6
• $2,500 per child in grades 7–12

If you have two children — one in 5th grade and one in 9th grade — the maximum combined subtraction is $4,125 ($1,625 + $2,500).

The K-12 Education Credit is a refundable tax credit that directly reduces your tax bill dollar-for-dollar, and it is refundable — meaning you can receive money back even if you owe no state income tax. The credit covers 75% of qualifying expenses.

The credit is income-limited. For the 2025 tax year, the income threshold is approximately $81,820 for families with one or two qualifying children (this figure adjusts periodically — verify the current threshold with the Minnesota Department of Revenue when you file). Families above the income threshold can still claim the subtraction but not the credit.

The maximum credit per child is $1,500. You cannot claim the same expense for both the subtraction and the credit — they use the same qualifying expense pool but operate as separate calculations.

What Expenses Qualify

Minnesota law defines qualifying expenses with specificity. Not everything you spend on your child's education counts.

Qualifying expenses include:

• Fees paid to a non-parent instructor for academic instruction (this includes fees paid to your microschool or learning pod facilitator)
• Academic textbooks used during a normal school day (not primarily religious in content)
• Educational technology — computers, tablets, software — when used for academic instruction and not primarily for entertainment
• Musical instrument rental when connected to formal music instruction

Expenses that do not qualify:

• Tuition paid to a private religious school (it qualifies for the subtraction but not the refundable credit)
• Materials that are primarily religious in nature
• Fees for extracurricular activities that are not academic instruction (sports leagues, recreational classes)
• Transportation to and from school

The phrase "non-parent instructor fees" is the most important qualifying expense for microschool families. Payments made directly to your microschool or pod for facilitation services — instruction provided by someone other than the child's parent — qualify for both the subtraction and the credit. Keep invoices and payment records.

What Receipts to Keep

The Minnesota Department of Revenue can request documentation if your return is reviewed. Keep the following for each qualifying expense:

• Receipts or invoices showing the date, vendor, amount, and nature of the purchase
• For instructor fees: contracts, invoices, or receipts from the microschool or facilitator showing what was paid and what was provided
• For textbooks: receipts showing publisher, title, and purchase price
• For educational technology: purchase receipts and a note confirming the primary use is academic

Organize receipts by child and by expense category. If you're claiming expenses for multiple children, the records need to be clearly separated. A simple folder per child per tax year — physical or digital — is sufficient. Do not discard receipts until the statute of limitations for your return has passed (generally three to four years after filing).

Where to Find the Claim Forms

The K-12 Education Credit is claimed on Schedule M1ED, which is the Minnesota Education Credit form. The subtraction appears on Schedule M1M, which covers various income additions and subtractions. Both schedules flow into your Form M1 (Minnesota Individual Income Tax Return).

If you use tax software such as TurboTax, H&R Block, or TaxAct, these schedules are generated automatically when you answer the questions about education expenses. The software will ask whether you have qualifying K-12 education expenses, walk you through eligible categories, and apply the credit or subtraction based on your income and the number of qualifying children.

If you file a paper return, download Schedule M1ED and Schedule M1M from the Minnesota Department of Revenue website. Complete them alongside your Form M1.

Instructor Fees and Your Microschool

If you run a microschool rather than solo homeschooling, the families enrolled in your program can potentially claim the K-12 Education Credit or Subtraction for the fees they pay to your school — as long as the fees represent non-parent instruction and not primarily religious content.

This creates a practical marketing and retention tool for microschool founders. When you enroll families, explaining the state tax benefit clearly is part of the financial conversation. For a family paying $8,000 per year in microschool tuition, the refundable credit alone can offset $1,500 of that cost. For higher-earning families above the credit threshold, the subtraction reduces their Minnesota taxable income by up to $2,500 per grade 7–12 child.

Families will need a receipt from your microschool that clearly states the amount paid and that it represents non-parent instruction fees. Issue these at year-end if families request documentation for their tax filings.

Income Limits and Phase-Out

The credit phases out above the income threshold. Minnesota has adjusted the phase-out schedule in recent years, so verify the current figures with the Department of Revenue when you file rather than relying on numbers from prior-year guides.

Families above the income limit are not left empty-handed — they still qualify for the subtraction, which reduces taxable income by up to $2,500 per grade 7–12 child. At a marginal state income tax rate of around 7–9.85% (depending on income), a $2,500 subtraction translates to $175–$246 in actual tax savings per qualifying child. Less dramatic than the refundable credit, but not nothing.

Common Mistakes

Claiming expenses for a primarily religious curriculum: Religious instruction and religious textbooks do not qualify for the credit, and qualifying the subtraction requires that the materials not be primarily religious. If your microschool or homeschool curriculum is faith-based, review the expense eligibility rules carefully before claiming.

Including sports and extracurricular fees: Youth sports leagues, dance classes, and recreational activities do not qualify even if they have educational components.

Missing the non-parent instruction requirement for the credit: Expenses for instruction provided by the child's own parent do not qualify for the refundable credit. If you are a parent running a learning pod and teaching your own child, your child's education is parent-provided — qualifying expenses are primarily materials and textbooks, not your own time.

The Minnesota Micro-School & Pod Kit includes a reproducible one-page K-12 Tax Credit summary sheet you can distribute to enrolled families, covering what qualifies, the income limits, and how to document your microschool fees on their state return.

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