Private School Tuition and Tax Deductions

[Ken]

Our schools are religious schools. And just as the IRS has determined that it is okay to “benefit” from the electricity at the church to warm up food for a potluck that you eat, and that electricity is paid for with donations from the potluck attendees - so is the school.
Again, critically, the donations here are not made to the school, nor earmarked for the school, nor is anyone turned away from attending due to money. This is what it hinges on. It does not hinge on whether anyone at the church is allowed to benefit from the programs of the church. That is absurd, and the IRS agrees. It is a multifaceted issue, how the money is given and directed, etc., it is not simply: “Did you benefit in any way?” from an organization where you gave money?
If it was the way you are portraying it, no donation to a church would be able to be used to pay for the building or the utilities either. The school is an extension of the church, a glorified Sunday school if you will. It is not its own legal entity.

The standard isn't "did you benefit in any way". And the operations of the church, mortgage payments, utility payments, electricity to warm of food for a potluck are all deductible because all of those fall under the category of intangible religious benefits. Nor does it make any difference whether or not the donations are earmarked. Because money is fungible.

The standard is that the cost of tangible benefits that you or your immediate family receive (which includes education) should be taken off the top from any charitable contribution that you make to the organization. So if you give $50,000 a year to your church and get back $10,000 in educational benefits for your children then you should really only be deducting the $40,000 net balance. But that obligation is on YOU and not your church since it is YOUR tax return with your signature on it, not your church's.

Are people doing it anyway? It sounds like it. I'm sure the IRS has bigger fish to fry. But when similar cases have come before the tax courts the IRS and courts have ruled that education costs are not deductible. Mennonites are hardly the only religious group to operate schools.

And by the way, I very much doubt that your church school is nothing more than a glorified Sunday school. I would hope that you are also educating your children in reading, writing, mathematics, history, science, and so forth. At least if you expect them to make their own way in the world some day.

[Josh]

According to Ken, virtually every Mennonite school is a tax cheat (plus lots of non-Mennonite schools), plus basically every Amish school too. You'd think if this were actually illegal that the government might have done something by now . . .

. . . particularly when the government was busy trying to shut Amish schools down back in the 1960s.

[Ken]

According to Ken, virtually every Mennonite school is a tax cheat (plus lots of non-Mennonite schools), plus basically every Amish school too. You'd think if this were actually illegal that the government might have done something by now . . .

. . . particularly when the government was busy trying to shut Amish schools down back in the 1960s.

No, schools have nothing to do with it since religious schools don't pay taxes. This isn't about schools religious or otherwise.

However individuals who make charitable donations to their churches should be subtracting the value of any tangible benefits they get back including education if they wish to deduct that charitable contribution from their personal income taxes. Are there lots of individuals who are failing to do that? Probably. It sounds like it.

If it is true as you said upstream that Mennonites don't itemize and deduct charitable contributions from their taxes, then it is a non-issue. Most people these days get nowhere near the $27,700 standard deduction unless they are wealthy. And next year it goes up to $29,200. So this is really only an issue for the wealthy who are itemizing their charitable deductions and tithing to maximize their personal tax deductions.

[Josh]

However individuals who make charitable donations to their churches should be subtracting the value of any tangible benefits they get back including education if they wish to deduct that charitable contribution from their personal income taxes. Are there lots of individuals who are failing to do that? Probably. It sounds like it.

If it is true as you said upstream that Mennonites don't itemize and deduct charitable contributions from their taxes, then it is a non-issue. Most people these days get nowhere near the $27,700 standard deduction unless they are wealthy. And next year it goes up to $29,200. So this is really only an issue for the wealthy who are itemizing their charitable deductions and tithing to maximize their personal tax deductions.

Okay Ken. Is your position really that we should be careful to deduct the value of potluck meals and the comfort of heating and A/C during a church service from the deduction an itemised filer would in turn claim?

[RZehr]

Our schools are religious schools. And just as the IRS has determined that it is okay to “benefit” from the electricity at the church to warm up food for a potluck that you eat, and that electricity is paid for with donations from the potluck attendees - so is the school.
Again, critically, the donations here are not made to the school, nor earmarked for the school, nor is anyone turned away from attending due to money. This is what it hinges on. It does not hinge on whether anyone at the church is allowed to benefit from the programs of the church. That is absurd, and the IRS agrees. It is a multifaceted issue, how the money is given and directed, etc., it is not simply: “Did you benefit in any way?” from an organization where you gave money?
If it was the way you are portraying it, no donation to a church would be able to be used to pay for the building or the utilities either. The school is an extension of the church, a glorified Sunday school if you will. It is not its own legal entity.

The standard isn't "did you benefit in any way". And the operations of the church, mortgage payments, utility payments, electricity to warm of food for a potluck are all deductible because all of those fall under the category of intangible religious benefits. Nor does it make any difference whether or not the donations are earmarked. Because money is fungible.

The standard is that the cost of tangible benefits that you or your immediate family receive (which includes education) should be taken off the top from any charitable contribution that you make to the organization. So if you give $50,000 a year to your church and get back $10,000 in educational benefits for your children then you should really only be deducting the $40,000 net balance. But that obligation is on YOU and not your church since it is YOUR tax return with your signature on it, not your church's.

Are people doing it anyway? It sounds like it. I'm sure the IRS has bigger fish to fry. But when similar cases have come before the tax courts the IRS and courts have ruled that education costs are not deductible. Mennonites are hardly the only religious group to operate schools.

And by the way, I very much doubt that your church school is nothing more than a glorified Sunday school. I would hope that you are also educating your children in reading, writing, mathematics, history, science, and so forth. At least if you expect them to make their own way in the world some day.

Those similar cases that you keep mentioning, may be “similar” but they are crucially different. You seem to fail to grasp the difference. I have discussed this issue with more than one accountant in more than one state, and received the same answer. So I think that I’ll believe what they have told me, until something changes.

[ken_sylvania]

Our schools are religious schools. And just as the IRS has determined that it is okay to “benefit” from the electricity at the church to warm up food for a potluck that you eat, and that electricity is paid for with donations from the potluck attendees - so is the school.
Again, critically, the donations here are not made to the school, nor earmarked for the school, nor is anyone turned away from attending due to money. This is what it hinges on. It does not hinge on whether anyone at the church is allowed to benefit from the programs of the church. That is absurd, and the IRS agrees. It is a multifaceted issue, how the money is given and directed, etc., it is not simply: “Did you benefit in any way?” from an organization where you gave money?
If it was the way you are portraying it, no donation to a church would be able to be used to pay for the building or the utilities either. The school is an extension of the church, a glorified Sunday school if you will. It is not its own legal entity.

The standard isn't "did you benefit in any way". And the operations of the church, mortgage payments, utility payments, electricity to warm of food for a potluck are all deductible because all of those fall under the category of intangible religious benefits. Nor does it make any difference whether or not the donations are earmarked. Because money is fungible.

The standard is that the cost of tangible benefits that you or your immediate family receive (which includes education) should be taken off the top from any charitable contribution that you make to the organization. So if you give $50,000 a year to your church and get back $10,000 in educational benefits for your children then you should really only be deducting the $40,000 net balance. But that obligation is on YOU and not your church since it is YOUR tax return with your signature on it, not your church's.

Are people doing it anyway? It sounds like it. I'm sure the IRS has bigger fish to fry. But when similar cases have come before the tax courts the IRS and courts have ruled that education costs are not deductible. Mennonites are hardly the only religious group to operate schools.

And by the way, I very much doubt that your church school is nothing more than a glorified Sunday school. I would hope that you are also educating your children in reading, writing, mathematics, history, science, and so forth. At least if you expect them to make their own way in the world some day.

Those similar cases that you keep mentioning, may be “similar” but they are crucially different. You seem to fail to grasp the difference. I have discussed this issue with more than one accountant in more than one state, and received the same answer. So I think that I’ll believe what they have told me, until something changes.

The reason you keep getting the same answer from multiple accountants is because the issue is so clear-cut. And they are all giving you the correct answer.

[ken_sylvania]

I've been paying quarterly for my children's education since 2016 and it is likely that I'll continue to do until at least 2028. It would be nice if all those tens of thousands of dollars were tax deductible. Unfortunately they aren't, even though the institutions themselves are are non profit organizations to which I can make tax-deductible contributions. I know this because they seem to call me at least monthly asking for donations.

Would the school where your children attend allow them to continue to attend, and would it continue to treat them the same, if you stopped paying the quarterly payments? I highly doubt it.

That is the crucial difference here. The privilege members' children have of attending our church schools is not contingent in any way on whether their parents do or do not contribute in the church offering, and therefore it is not a benefit received in exchange for the contribution.

[Judas Maccabeus]

And by the way, I very much doubt that your church school is nothing more than a glorified Sunday school. I would hope that you are also educating your children in reading, writing, mathematics, history, science, and so forth. At least if you expect them to make their own way in the world some day.

Excuse me! I teach at one of these schools, and comparing notes with my public school teacher daughter, I would say our students are a good two years ahead of their public school peers in most subjects.

My middle school students can explain how an electric motor works. We have retired university quality microscopes for life science, which get a fair amount of use. Last year, my students built a working telescope out of parts from “surplus shed.” The parts came without documentation, they had to determine these experimentally.

The public schools here are well…….from the local tv station.

“The latest round of state test results is raising alarm in Baltimore City Schools. Project Baltimore found that 40% of Baltimore City high schools, where the state exam was given, did not have any students score proficient in math. Not one student.”

My public school teaching daughter is quite familiar with Christian Schools Curriculum. Her take is that our 8th grade would not be challenged by this test.

I am sure my students will do just fine. City schools not so much.

[ken_sylvania]

Even if schooling were considered to be a quid pro quo benefit, our church would have no possible way to include the required notice on the donation receipt. The deacon wouldn't have any way to know which of the donor numbers are associated with individuals whose children are in school.

[Ken]

Even if schooling were considered to be a quid pro quo benefit, our church would have no possible way to include the required notice on the donation receipt. The deacon wouldn't have any way to know which of the donor numbers are associated with individuals whose children are in school.

They don't have to. Since it is a non-profit, all they need to do is calculate the cost of running the school, divide by the number of students enrolled, and voila, that is the value of the benefit provided. If there are parents who are making itemized deductions to the church who have their children enrolled in the school then that would be an appropriate amount to exclude from their claimed tax deductible contribution. If parents aren't doing that then the chances are exceedingly slim that they will ever be audited (about 0.38% chance). And if audited, the chances that this particular claimed deduction will be put under the microscope are slimmer still.