Private School Tuition and Tax Deductions

[Josh]

Here is an article about a Catholic Parish where this subject came up with a local parish school and it was controversial enough to make the local news:

http://nelsoncountygazette.com/?p=19690
https://www.wave3.com/story/23261676/bl ... wn-school/

This isn’t the same as what a Mennonite church does. We make donations and they are not earmarked for anything. Parents are also not herded into a meeting to make pledges. I don’t have children in school and I’m expected to support the school as much as a family with 6 kids in the school.

[Josh]

Here is an article about a Catholic Parish where this subject came up with a local parish school and it was controversial enough to make the local news:

http://nelsoncountygazette.com/?p=19690
https://www.wave3.com/story/23261676/bl ... wn-school/

Those articles present the debate, the comments from parishioners and the church, and quotes from the law, but they don't give any information about what the resolution was. In other words, just like this discussion. Do you have any idea how it shook out?

The article doesn't say.

But then it wouldn't unless the there was an IRS audit of some taxpayer claiming an illegal exemption and the case went to tax court and there was a public record of decision. Otherwise what any individual taxpayer chooses to claim on their own tax return is private information.

Don’t see the IRS involved here - this was an angry parent that went and complained to a TV station.

[ken_sylvania]

I’ve never heard of anyone trying to deduct the direct tuition payment.

Not only have I heard if this happening but some people attended certain Mennonite churches so they could do this- not all the churches allowed it. School was not for just one church but for many.
I think you are better off staying away from it period. It's a gray area and yes the money isn't going into the coffers of the gov't for more bombs or whatever but this is a place where I feel as believers we need to avoid those gray areas. But that it my opinion.

That’s not the same as deducting tuition. And yes, a church can support multiple schools are vice versus.

Deducting donations to a church is not a “gray area”.

Oh, but what if my church holds special meetings and provides lunch for all attendees? Do the receipts for the donations given in the offering that morning need to include a note saying that a meal worth $11.47 was provided?

[Josh]

If there is a tuition, then it is a “gray area” or not legal to deduct. But in our school, the school is not an entity at all. There is no way to pay the school at all. The school has no benefactors at all either. If someone wants to support the school, he can’t. The school is a function of the church, and the only way to support the school, is through the free will offerings to the church. Not a penny is required to attend the school, any more than it costs someone to attend the church service.

While it sounds like there are church schools that do not operate like this, our model is tax deductible. I gave money to the church and supported the school in that way for over ten years before I had children in school, and continue to give to the church, and plan to continue after my children are out of school. Tuition is not part of the conversation at all, either in 1999 nor will it be in 2039.

The money I donate may well go to another church’s school that has more needs than ours does. (Our buildings are paid off.) Or it may even go to the benevolence fund which has been used for things as random as helping a town person pay for a moving truck when they needed to move but were out of cash.

Helping the school is welcome but it doesn’t accept direct donations - it’s complicated to set that up and our school isn’t incorporated as an entity that can accept donations from the public. But if someone wants to contribute, they can come to a work day and spread mulch, do landscaping, fix up the building, or donate materials. I’m not aware of any IRS rule against doing such things although none of that is “tax deductible”.

The main thing we have to keep track of is that a private school has to pay payroll taxes for teachers and the property is subject to property tax whilst the church building isn’t, which is an aspect of state law. (This is unfair since public schools don’t have to pay property tax, but we do.)

There is a nominal amount of tuition established because it generally helps some people to place more value on something they pay for. Those who are are unable to afford it receive help and their tuition payments are waived. As others have said, tuition does not come even close to covering payroll, let alone other costs.

[Josh]

Not only have I heard if this happening but some people attended certain Mennonite churches so they could do this- not all the churches allowed it. School was not for just one church but for many.
I think you are better off staying away from it period. It's a gray area and yes the money isn't going into the coffers of the gov't for more bombs or whatever but this is a place where I feel as believers we need to avoid those gray areas. But that it my opinion.

That’s not the same as deducting tuition. And yes, a church can support multiple schools are vice versus.

Deducting donations to a church is not a “gray area”.

Oh, but what if my church holds special meetings and provides lunch for all attendees? Do the receipts for the donations given in the offering that morning need to include a note saying that a meal worth $11.47 was provided?

The food committee doesn’t even get reimbursed for buying groceries (I have no idea why, but they just don’t, so if you get elected to food committee, expect to open your wallet).

The Methodist church near me holds sausage pancake breakfasts that have no charge. Donations only. I have heard this also excuses them from various county/state food laws involving selling food. They actually actively try to encourage needy people to come and enjoy a meal and not feel obligated to pay.

The fire hall also holds fundraising suppers. Donations are also accepted but no fixed price is at the door. The groceries for the food are usually donated too…

[Ken]

Those articles present the debate, the comments from parishioners and the church, and quotes from the law, but they don't give any information about what the resolution was. In other words, just like this discussion. Do you have any idea how it shook out?

The article doesn't say.

But then it wouldn't unless the there was an IRS audit of some taxpayer claiming an illegal exemption and the case went to tax court and there was a public record of decision. Otherwise what any individual taxpayer chooses to claim on their own tax return is private information.

Don’t see the IRS involved here - this was an angry parent that went and complained to a TV station.

We would not know if the IRS was involved since audits and IRS enforcement actions are private and confidential. If you are audited for something you do the IRS doesn't run to the media to announce it. They are prohibited by law from doing that.

[QuietlyListening]

It isn't donations to the church- it is paying your tuition thru the church so you can get a tax deduction. Not the same thing.

[Josh]

The article doesn't say.

But then it wouldn't unless the there was an IRS audit of some taxpayer claiming an illegal exemption and the case went to tax court and there was a public record of decision. Otherwise what any individual taxpayer chooses to claim on their own tax return is private information.

Don’t see the IRS involved here - this was an angry parent that went and complained to a TV station.

We would not know if the IRS was involved since audits and IRS enforcement actions are private and confidential. If you are audited for something you do the IRS doesn't run to the media to announce it. They are prohibited by law from doing that.

Actually, if an institution was subject to enforcement action we probably would know about it. The simple fact is that the IRS isn’t even focused on a couple bucks from improper deductions at some Catholic school which was doing it in violation of diocesan and USCCB policy.

The IRS’s biggest enforcement priority? Bars and nightclubs where lots of cash is handled and wages and tips are underreported, cash sales aren’t recorded, and bogus expenses are rampant. But that wouldn’t be as much fun to talk about, would it?

[Ken]

Not only have I heard if this happening but some people attended certain Mennonite churches so they could do this- not all the churches allowed it. School was not for just one church but for many.
I think you are better off staying away from it period. It's a gray area and yes the money isn't going into the coffers of the gov't for more bombs or whatever but this is a place where I feel as believers we need to avoid those gray areas. But that it my opinion.

That’s not the same as deducting tuition. And yes, a church can support multiple schools are vice versus.

Deducting donations to a church is not a “gray area”.

Oh, but what if my church holds special meetings and provides lunch for all attendees? Do the receipts for the donations given in the offering that morning need to include a note saying that a meal worth $11.47 was provided?

The IRS standard is $50. If the benefit received is less than $50 then the IRS considers it of "insubstantial value" and is not required to be reported: See the IRS guidelines on this topic here: https://www.irs.gov/pub/irs-tege/rp_1990-12.pdf

So if you hold a fundraising dinner where the value of the dinner exceeds $50/plate then you would need to report it on the donation receipts. That would be a pretty fancy dinner. Maybe something that would happen for something like a Museum or Symphony fundraising gala with a fancy catered dinner. But not a typical Mennonite Church.

None of affects or restricts how a church operates in any way, or how members can contribute. It is only about how wealthy people need to document contributions for which they are claiming an itemized tax deduction. If you aren't doing that you have no need for a receipt in the first place.

[silentreader]

Those articles present the debate, the comments from parishioners and the church, and quotes from the law, but they don't give any information about what the resolution was. In other words, just like this discussion. Do you have any idea how it shook out?

The article doesn't say.

But then it wouldn't unless the there was an IRS audit of some taxpayer claiming an illegal exemption and the case went to tax court and there was a public record of decision. Otherwise what any individual taxpayer chooses to claim on their own tax return is private information.

And if an individual taking this tax "loophole" gets audited, all they have to do is show their end-of-year statement of donations to their church as evidence. The IRS can't audit winks and nods.

All in all, it basically looks like a matter of conscience and churches respecting the intent of the law. So far, it seems it bothers some and not others. I would like to hear more from people whose churches/schools have thoroughly discussed the issue and decided one way or another, and why.

Meanwhile in Canada....
Our church does not have its own school, but the vast majority of our church's school children go to either one of two sister church schools in the area.
All our offerings are earmarked for a particular fund each Sunday. We have a "school fund" which is divided up between the two schools to help defray tuition costs for our children attending. It is understood that anyone with children in those schools will not receive a charitable donation receipt for donations to our school fund.
At a business meeting encouragement was given that persons without school children would increase their donations to the school fund and that parents with school children could then donate less to the school fund and more to other funds for which they could be given receipts. I think this seems to be working.
We also have a separate named school fund to help the one school with capital expense. We have a presence on their school board to help make this acceptable to the CRA.