By LuAnne Schendel January 2018
The Tax Cuts and Jobs Act was signed into law December 22, 2017. This act has some provisions that may be a boon to private Christian schools along with some provisions that may bring challenges.
The Act gives families more opportunities to save and pay for education options. 529 college savings accounts can now be applied to K–12 private school tuition. This gives families the freedom to use their savings for school tuition without having to pay federal taxes on the growth of the savings. (The Heritage Foundation) The maximum distribution for K–12 tuition is $10,000 per year per child beginning in 2018.
The medical deduction was increased, which can be a help to families who take a tuition or services deduction, especially in schools that focus on learning differences.
A number of proposals of concern to schools did not pass:
- Teachers will still get a tax break on up to $250 of their personal funds used to purchase school and classroom supplies.
- Schools can still provide tuition benefits to school employees as a tax free benefit.
- Schools can still provide tuition assistance to staff members who are pursuing further education as a tax free benefit.
- There were no changes to housing benefits.
- Tax exempt bonds were not repealed although they now have some limitations on advance funding.
A grassroots effort carried out by colleges, schools, teachers, and parents was instrumental in the prevention of these measures.
Concerns have arisen regarding the increase to the standard deduction and the limitation of itemized deductions. This could reduce the number of individuals who itemize deductions on their personal tax returns. With no tax incentive to make a charitable gift, people may decrease their giving. The legislation doubles the exclusion amount for estate and gift tax purposes. Gifts that might have been given to tax-exempt organizations to avoid the estate tax could dry up as donors leave their wealth to their family members tax-free.
It will be more important than ever for Christian schools to build relationships with their donors and keep the mission and vision of the school at the forefront. Gifts to Christian schools have eternal impact far beyond the tax implications.