Family system and functioning play an integral part in individuals’ emotional development and channel the various coping mechanisms adopted by individuals to deal with multiple situations in life. The study explored family functioning, family differentiation, family stress, and family coping strategies among homeschooling families. A sample of 115 homeschooling families was selected by snowball sampling from India. A quantitative approach using correlation and regression analysis was used for the study. There has been a surge in families opting for home-based education post-pandemic. There is a need for an in-depth exploration of how these families function, develop differentiation, experience stress, and cope in a collectivistic culture like India. The results indicate that balanced cohesion in families predicts better differentiation in the mother–child subsystem, while family satisfaction predicts better differentiation in the husband and wife subsystem. The research findings can form a basis for developing family therapy specific to homeschooling and enhance the knowledge and understanding regarding the benefits and costs of homeschooling.