Pete McMartin: Tax deductions add to taxpayers’ support of private schools

I have been asking about this for the last year. I was hoping that a tax accountant would suddenly want to be my friend. Finally I have an article that goes into some detail. Things may have changed since the article was written in 2007 but probably not by much. Click here to read the full article or an excerpt below.

 

But several sympathetic emailers pointed out that government funding of private schools went beyond the per-pupil funding formula that has those schools receiving as much as 50 per cent of operating costs.

That extra help came in the form of tax relief.

For example, independent non-profit schools with a charitable tax number can issue tax receipts for deductions against a portion of tuition. These schools are usually faith-based, in which tuition qualifies as a charitable donation. According to the Federation of Independent School Associations B.C., it can typically amount to about half of tuition costs, though examples exist where the limit is much higher. Former Sun education reporter Janet Steffenhagen found one Christian school in Terrace that stated in its tuition schedule that “nearly all of the tuition qualifies as a charitable donation, in effect reducing tuition cost by nearly 40 per cent.” And according to its website, the elite Vancouver College, a private Catholic school, issues a tax credit for about 80 per cent of the total cost of tuition.

Parents of special needs children in private schools may be able to claim tuition costs as a medical expense tax credit. The credit is available if the school’s facilities, equipment or personnel is required for a student’s special needs, and a doctor can substantiate those needs in writing.

Another tax aid, one potentially more valuable since it can be applied to reduce income and thus the marginal tax rate, is the daycare deduction available at private schools. Yes, daycare.

Sandy Garossino, an associate editor at the online National Observer, recently had a letter passed on to her that had been mailed out last year to parents from the elite St. George’s School for Boys (which presumably would include the premier, since her son attends St. George’s). It was sent out to parents to inform them of the benefits of — as the letter stated — the “child care expense deduction for day students.”

“Eligible child care expenses include services provided by an educational institution for supervision before and after educational classes or during lunch or break times. If your child has been, at any time during the year, under the age of 16, you may qualify for this deduction.”

According to the letter, the amount of tuition estimated to be eligible for child care expenses for that year was $3,805.07 for students in Grades 1-7 and $3,653.89 for students in Grades 8-12. This type of deduction, the B.C. Teachers Federation points out, is not available to parents of children attending public schools. A subsequent opinion piece Garossino wrote for the Observer ran with the headline, “SHAMELESS: The hidden private school tax haven for the rich.”

Another emailer wrote in to draw attention to the tax-deductible charitable donations made to private schools by parents and alumni.

“I would like to add the suggestion that the 35 per cent government assistance (to elite private schools) is greatly underestimated,” he wrote. “I think the de facto costs per student to the public for private school students is actually much higher. … The big-image schools garner substantial and sometimes spectacular donations from their fundraising activities. My wife used to teach at a private school, so I saw just how much is raised for buildings and building upgrades, buses, science labs, computer labs, sports equipment, sports fields, field trip funds, overseas excursions, gifts to teachers and administrators, and, well, the list goes on.”

St. George’s, for example, is a registered charitable organization in which, according to its website, contributions “are tax creditable as prescribed by Canadian law.” The school raised $23 million in cash and pledges in the 2015-2016 school year alone.

Some private schools allow parents to pay tuition by credit card, a nifty way to rack up air miles and other rewards.

And wealthy families can set up a family trust, where income is diverted to a child, and in which the child can earn up to $20,000 in capital gains before paying tax. That tax-free income generated by the fund can be used to pay tuition.

Private school costs are undoubtedly a financial burden for many families. Not all are wealthy. But those families, wealthy or not, have access to strategies that lighten that burden, and those strategies aren’t available to parents with children in the public system.

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