Private School Tuition and Tax Deductions

[RZehr]

I got this on Tuesday:

So sorry! I was flooded with email after you sent this for year-end tax planning and I never circled back to it to give an answer. I just read something that suddenly reminded me about your question.

I am not entirely sure of the answer. Let me run it by my not-for-profit team to see what information they can provide.

For what it’s worth, this is from a partner at SingerLewak out of Los Angeles. A top 100 accounting firm in the US based on revenue. Not a fly by night accountant who tactfully navigates deduction boundaries with creativity.

[ken_sylvania]

I got this on Tuesday:

So sorry! I was flooded with email after you sent this for year-end tax planning and I never circled back to it to give an answer. I just read something that suddenly reminded me about your question.

I am not entirely sure of the answer. Let me run it by my not-for-profit team to see what information they can provide.

For what it’s worth, this is from a partner at SingerLewak out of Los Angeles. A top 100 accounting firm in the US based on revenue. Not a fly by night accountant who tactfully navigates deduction boundaries with creativity.

And this guy was reading Mennonet?

[mike]

Last business meeting, I heard that our conference's deacons are re-thinking aspects of the tax-deductible end of year receipts they provide because of increasing questions about the legality of counting private school tuition as tax deductions. Maybe they are reading MennoNet too.

[RZehr]

I got this on Tuesday:

So sorry! I was flooded with email after you sent this for year-end tax planning and I never circled back to it to give an answer. I just read something that suddenly reminded me about your question.

I am not entirely sure of the answer. Let me run it by my not-for-profit team to see what information they can provide.

For what it’s worth, this is from a partner at SingerLewak out of Los Angeles. A top 100 accounting firm in the US based on revenue. Not a fly by night accountant who tactfully navigates deduction boundaries with creativity.

And this guy was reading Mennonet?

I don’t know about that, but I do know that I asked her about the issue via email.

[RZehr]

Curious if you ever got an answer from the second tax accountant?

The attorneys did not answer the question, and essentially deferred to accountants:

Those are some good questions. I would suggest checking with your CPA on these issues, if they are not able to get you an answer I can look into it. But typically they are more familiar with the income tax rules for these deductions and could more easily find an answer for you.

I did not press them further.

[ken_sylvania]

Curious if you ever got an answer from the second tax accountant?

The attorneys did not answer the question, and essentially deferred to accountants:

Those are some good questions. I would suggest checking with your CPA on these issues, if they are not able to get you an answer I can look into it. But typically they are more familiar with the income tax rules for these deductions and could more easily find an answer for you.

I did not press them further.

Thanks.
Based on what the IRS says I suspect that the scenario Mike was describing, where there there is an expectation for each family to pay their share of "tuition" for the school either directly or through the church offering, would potentially run afoul of their regulations, while a scenario where the school is truly funded by all the church members rather than the school families is more likely to be tax deductible. I would also believe that if your church uses a "number system" for donors where donations are tracked only by donor number with no identifying name, that would lend itself favorably to an argument that church donations are not tuition.

[mike]

I would also believe that if your church uses a "number system" for donors where donations are tracked only by donor number with no identifying name, that would lend itself favorably to an argument that church donations are not tuition.

So if a person uses such a number system and makes tuition payments through the church's school offerings, it is basically a matter of conscience and their personal code of ethics, given that they are unlikely to ever have these donations challenged in an audit. Is that about right?

[RZehr]

I've never heard of this number system. What is the difference between a name, a donor number, or an account number - as it relates to trackability and deductibility?

[mike]

I've never heard of this number system. What is the difference between a name, a donor number, or an account number - as it relates to trackability and deductibility?

It's a way to keep track of donations where donors wish to give anonymous donations in cash but still get a receipt at the end of the year. At the beginning of the year, the deacon hands out boxes of envelopes, or rather makes them available, where each box is a unique number. He tracks donations by the numbers on the envelopes, and issues receipts at the end of the year for each number. No names are used.

[RZehr]

I've never heard of this number system. What is the difference between a name, a donor number, or an account number - as it relates to trackability and deductibility?

It's a way to keep track of donations where donors wish to give anonymous donations in cash but still get a receipt at the end of the year. At the beginning of the year, the deacon hands out boxes of envelopes, or rather makes them available, where each box is a unique number. He tracks donations by the numbers on the envelopes, and issues receipts at the end of the year for each number. No names are used.

Thanks.