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How to Tax Deduct Your Children’s Tuition With Special Needs

A Brief History

In 1991 a student's parent of Fraser Academy (a private school for children with special needs and learning disabilities) challenged CRA and The Minister of National Revenue and won. Court File No.90-1931(IT). The basis of the case was that Fraser Academy tuitions met all criteria to qualify as a “medical expense”. This win paved the way for many others in the future to now apply the tuition as a medical tax credit. So far so good, but is there a better way to deduct these expenses?

Simple Tax 101

A medical tax credit is not really a deduction, but a credit system with a number of rules. A tax payer must apply for a credit for any tuition (medical expense) that exceeds 3% of their income. Any expense that exceeds this 3% threshold will be granted a tax credit (approximately 25%).

Is There an Alternative?

For parents who are self-employed or own a business, the answer is yes! It is Private Health Services Plan. Simply stated, a Private Health Services Plan is a Trust bank account that allows tuition expenses to be deducted from the income of a business. The Trust then pays back the owner, employee or active shareholder 100% and it's non taxable. Not only is tuition a deductible expense but so is all other health, dental and vision expenses. The list is vast!