There are dozens of tax breaks to support post-secondary education, from
tuition and education tax credits to the newly proposed textbook tax credit.
But when it comes to private-school education, tax breaks are harder to find.
In 2002, parents in Ontario were able to take advantage of the short-lived
private-school tax credit, which was equal to 10% of eligible tuition fees in
2002 and was to increase to 50% by this year. Unfortunately, when Dalton
McGuinty's Liberal government took power in 2003, the credit was cancelled.
Any remaining tax relief for private-school fees usually falls within the
rubric of three possible tax breaks: child-care deduction, medical-expense tax
credit and the donation tax credit.
CHILD-CARE DEDUCTION The Income Tax Act expressly prohibits amounts paid for
"education" from qualifying as a child-care expense. However, the Canada Revenue
Agency (CRA) does permit parents who send their children to private schools that
offer both child care and an educational program to claim the portion of school
fees specifically relating to child care, such as supervision before and after
classes.
The CRA also accepts that if tuition fees are paid for a child under the
compulsory school age, these services generally constitute as child care, not
education, and may qualify as child-care expenses.
A related 2005 tax case involved a Halifax parent who enrolled her daughter
in a private kindergarten class as the girl was 10 days too young to enter the
public- school system. Even though the child received an education, the judge
concluded that the "purpose for putting her daughter in [the private school] was
for reasonably priced child-care services and any education received was an
incidental benefit," and allowed her to claim the private school tuition as a
child-care expense.
MEDICAL-EXPENSE CREDIT In some cases, tuition paid to private schools for
children with special needs may qualify as medical expenses. However, the CRA
states that the child must require, by reason of a physical or mental handicap,
the equipment, facilities or personnel specially provided by that school for
care of students suffering that particular handicap. This requirement must also
be certified by a qualified person, such as a psychologist or doctor.
There have been numerous cases over the years dealing with whether amounts
paid for attendance at certain specialized private schools qualify for the
medical-expense tax credit. Usually, it is not determined by the school itself,
but the child's disability.
For example, in 1998, Canada's Tax Court heard four cases involving children
who were sent to the Choice School for Gifted Children in Vancouver. The only
taxpayer successful in claiming tuition as a medical expense was the one whose
child was certified to be suffering from attention deficit hyperactive disorder
and oppositional defiance disorder. In the other three cases, while the judge
acknowledged that the children had learning difficulties, the court could not
conclude that the children suffered from any known mental handicap and the
tuition fees were denied as medical expenses.
DONATION CREDIT Finally, parents who send their children to a private school
that teaches religion, either exclusively or combined with secular subjects, may
be eligible to receive a donation receipt for all or a portion of the tuition
fees paid.
- Jamie Golombek, CA, CPA, CFP, CLU, TEP, is the vice-president, taxation and
estate planning, at AIM Trimark Investments in Toronto.