If you have a child with special needs, a learning disability or an illness that requires special schooling, you may be eligible to have your child’s private school funded by your business as a legitimate medical expense.
Many private schools cost $25,000 or more per year. Obviously, parents who elect to send their healthy children to private school is the prerogative of the parent. For many parents who send their children to private school they do it willingly and accept the expense.
For many children who have a disability, may be on the spectrum for autism, ADHD, severe anxiety or any number of debilitating illnesses or conditions, the public school system is ill-equipped to effectively deal with these children. Some children who may have ADHD, although very common, need a smaller classroom setting in order to be successful in school. In many instances, the only solution may be a private specialized school that can cater to these children’s special needs.
For business owners, there may be an opportunity to write this private school education through their business as a medical expense. This isn’t something that is granted by a traditional benefit provider. This is usually done by way of a specialized Healthcare Spending Account (HSA) provider.
The fact that a private school annual expense costs approximately $25,000, this will typically translate into a required salary of $50,000 or more if paid with after-tax dollars. If you do submit it through an HSA, it becomes a 100% expense to the business. The business owner receives 100% reimbursement from the HSA provider. The HSA provider invoices the business for the entire tuition of the special need’s child plus an administration fee (usually 10%) plus applicable taxes. The net tax savings to the business owner can prove to be significant, especially when factored over the tenure of the child’s years in school.
There are a few criteria that need to be adhered to for this to be eligible expense:
- A doctor’s note stipulating the child’s condition needs to be furnished to the HSA provider
- The business needs to be incorporated (sole proprietorships aren’t eligible)
- The Healthcare Spending Amount can’t be greater than 20% of the business owner’s T4’d income (dividend income is not eligible). The fair and reasonable rule prevails here.
- Can’t be exclusive as a shareholder only benefit
There’s nothing we won’t do for our children. If our child has a learning disability or medical condition, we will make whatever sacrifices necessary in order to give our child a fighting chance. If you didn’t utilize a HSA, you can claim up to a maximum tax credit on your personal income tax return of approximately $2,500. Obviously the difference between the two options are significant. The other option may be to apply for a Disability Tax Credit but depending upon your family income level, you may not be successful in having it granted.
For business owners, the difference in net cost is significant. Provided you meet the criteria, the HSA option is completely legitimate and can translate into a personal net savings of up to $25,000 per year. It’s your decision but it’s your money!
Chris Coulter is the Founder and President of The Finish Line Group. Chris’ purpose in life is to convey the lessons learned from his past experiences so that others will thrive in their lives and be able to minimize the impact of their setbacks.
In business, Chris works with business owners to protect their wealth, reduce corporate and personal taxes, create viable succession strategies and deploy tactics for key employee retention. Chris uses his experience running a successful business for 20 years, only to lose it all after the financial crisis of 2008 to educate business owners on how to protect their assets and their employees.