With tuition ranging from $5,000 to $65,000, cost is a key factor for many families considering private school education. Still, some 45 per cent of private-school students come from middle-income families. And enrollment has increased 35 per cent over the past decade as parents respond to the flexibility and diversity offered by some 1,700 independent schools in Canada. Today, a growing pool of resources can help parents meet the challenge of financing their child’s private school education.
Your family is your primary and most important source of funds. Robyn Thompson, a senior financial planner with R.N. Croft Financial Group Inc. of Thornhill, Ontario, advises families to consider these key issues:
Revisit your household budget. If you earn an average income, plan carefully. You may need to downsize or postpone discretionary expenses such as vacations, entertainment and home upgrades. Allocate a higher portion of your budget to your child’s education.
Make full use of discretionary investment funds to maximize ongoing savings.
Tax-Free Saings Accounts
Income earned and withdrawn on these accounts are free of tax and may be used for any purpose.
Family and Community Support
Grandparents and other relatives are often a source for education funding. Certain tax rules may apply, however. Charity and community organizations may be a source of funding as well.
Canada’s independent schools may target up to 20 per cent of their student population for financial assistance, says William Mitchell, Executive Director (Interim) of the Canadian Association of Independent Schools (CAIS). Typically, three types of financial assistance may be offered, depending on the school:
Scholarships may be offered to students with a high level of academic proficiency and other achievements, such as community involvement or distinction in the arts or athletics. Find our more about scholarships or how to qualify.
Bursaries, the most widely used form of financial assistance, are needs-based, non-repayable grants offered to qualifying families. The amount of the bursary or grant depends on the school. Many schools also offer sibling bursaries or discounts for families with more than one child enrolled in the school.
Instalment payment, usually monthly, help spread payments over the year. Ask the school’s financial officer for more information or check the school’s website.
Although no direct tax relief is available for private school tuition, several indirect measures are available, including deductions, credits and tax-minimizing strategies.
Tax exemptions can include the scholarships and bursaries offered by private schools, and financial gifts by family members wishing to contribute to your child’s tuition. The catch is the “attribution rule”, under which any income earned from that gift will be attributed back to the donor for tax purposes. However, there may be exceptions to this rule.
Alan Rowell, a tax specialist at The Accounting Place in Stoney Creek, Ontario, says that capital gains realized on property transferred to children under 18 are not attributable back to the source. So large gifts of capital property to a minor may, for example, be invested in the student’s name in a “corporate-class” type of investment (usually mutual funds), where any disposition of units is treated as a capital gain, and is thus taxed at the student’s lower rate.
Indirect tax deductions are also possible in some cases. Samantha Prasad, a tax specialist and partner with the Toronto law firm Minden Gross LLP, says a portion of school fees that relate to child care, not academic instruction (such as lunchtime supervision) for students under 16 may be deductible as a child care expense.
If the school is registered as a charity, the tax benefit of a charitable donation can be significant, depending on the province of residence. Check with your prospective school to see whether fees are segregated and if tax receipts are issued for these purposes.
It may also be possible to claim the tuition fees as a medical expense tax credit, provided that a doctor certifies in writing that the facilities, equipment or personnel of the private school are required due to the student’s mental or physical needs.
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