12 April 2012 Ministerial Correspondence 2012-0439601M4 - Deductibility of Fees paid to a Montessori School

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Can the fees paid to a Montessori School be deductible for income tax purposes?

Position: No, unless they are considered as child care expenses under section 63 that are incurred for the purpose of allowing the taxpayer to work, carry on a business or undertake certain certain educational/research activities.

Reasons: The provisions of the Income Tax Act do not allow any deductions for "costs of education" incurred in respect of a child's private education.

XXXXXXXXXX

Dear XXXXXXXXXX:

Your member of Parliament, XXXXXXXXXX, forwarded to me a copy of your correspondence, which I received on March 6, 2012, about claiming the fees paid to a Montessori School for your son’s private education, the federal and Ontario ecoENERGY Retrofit rebate, and the goods and services tax/harmonized sales tax (GST/HST) new housing rebate.

The provisions of the Income Tax Act do not allow a taxpayer to deduct the costs he or she paid for a child’s private education. However, section 63 of the Act permits a taxpayer to claim a deduction for child care expenses to allow the taxpayer to work, carry on a business, or take on certain educational or research activities. The rules for child care expenses are discussed in detail in Interpretation Bulletin IT-495R3, Child Care Expenses. A copy of the bulletin is available on the Canada Revenue Agency (CRA) Web site at www.cra.gc.ca/E/pub/tp/it495r3.

Determining whether a particular expense is for child care or education depends on the particular facts. As stated in paragraph 3 of Interpretation Bulletin IT-495R3, if an educational institution offers child care as well as an educational program, the part of the fees paid to the institution relating to child care (in other words, the supervision before and after classes or during the lunch period) may qualify as child care expenses. However, if the payment is for a child under the compulsory school age, the services being provided are generally considered to be for child care rather than education, unless the facts indicate otherwise.

An educational program is more goal-oriented than child care, and the child is expected to learn skills and progress through a planned program of instruction, whereas a child in a typical child care setting is not expected to achieve any specific educational goals.

If an educational institution offers a full-day kindergarten program, the fees payable for that program are not deductible as a child care expense. On the other hand, if an educational institution provides a separate or additional program of child care as well as a half-day or alternate-day kindergarten program, the part of the fees related to the child care qualifies as a child care expense.

Regarding your installation of a geothermal energy system, I understand that your contractor has gone out of business and may not have registered you, as promised, by the ecoENERGY Retrofit – Homes program deadline, thereby putting at risk the rebate to which you may have been entitled. The Department of Natural Resources Canada administers the ecoENERGY Retrofit – Homes program. I am therefore forwarding a copy of our correspondence to the Honourable Joe Oliver‚ Minister of Natural Resources, for his consideration.

You can get more information on the ecoENERGY Retrofit – Homes program on the Natural Resources Canada Web site at www.oee.nrcan.gc.ca/residential/6551 or by calling Service Canada at 1-800-622-6232.

As you requested in your correspondence, the following table indicates the approximate number of successful applications to the federal GST/HST new housing rebate program. As you did not mention a time frame, I am including the most recent and updated information of approved applications for the 2011-2012 fiscal year, up to and including February 2012, for all new housing rebate types.

Federal New Housing Rebate Claims
(GST190 and GST191) Processed in Calendar Year 2011

Province/Territory			Approved
Alberta					12,550
British Columbia				 5,970
Manitoba					 2,640
New Brunswick				 1,820
Newfoundland and Labrador		 1,430
Nova Scotia					 1,490
Ontario					37,060
Prince Edward Island			   420
Quebec					27,050
Saskatchewan				 3,170
Territories 				   140
Grand Total					93,740

All the figures in the above chart have been rounded up to the nearest 10. Because of the small numbers involved, Yukon, Nunavut, and the Northwest Territories have been grouped together to avoid confidentiality issues.

You believe the $450,000 ceiling for the federal part of the GST/HST new housing rebate program should be increased. The CRA is responsible for administering the Excise Tax Act, which governs the GST/HST. Any change to the legislation, such as an increase to the $450,000 fair market value threshold for the federal portion of the GST/HST new housing rebate program, falls under the responsibility of the Department of Finance Canada. I am therefore also forwarding a copy of our correspondence to the Honourable James M. Flaherty, Minister of Finance, to make him aware of your concerns.

I trust that the information I have provided and the referrals are helpful.

Yours sincerely,

Gail Shea, P.C., M.P.
Minister of National Revenue

c.c.: The Honourable James M. Flaherty‚ P.C.‚ M.P.
Minister of Finance
House of Commons
Ottawa ON  K1A 0A6

The Honourable Joe Oliver‚ P.C.‚ M.P.
Minister of Natural Resources
House of Commons
Ottawa ON  K1A 0A6

XXXXXXXXXX‚ M.P.
XXXXXXXXXX
House of Commons
Ottawa ON  K1A 0A6