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We just learned that our daughter's private school is a 501(c)(3).  We are told that means that a portion of the tuition is tax deductible.  Can you give me the details regarding this?

Unfortunately, what you have been told is not correct.  A contribution to a 501(c)(3) charitable organization may be deductible, but your tuition payment is made in return for the education provided and is not a contribution.  The essence of a contribution is a gift to the organization without any expectation of goods or services in return.  (Where goods or services of more than nominal value are provided in return, only the difference between the payment and the value of the goods or services is deductible. (See Ready Reference Page:  “Charities Must Set Value of ‘Quid Pro Quo’ Gifts”)

One accountant tried for years to obtain a deduction for the part of tuition paid to a religious school that he claimed was allocated to purely religious education.  The 9th Circuit Court of Appeals in two separate cases affirmed the Tax Court, which had affirmed the Internal Revenue Service, and held that no deduction was allowable.  In the most recent decision, the Court said that the accountant failed on two key issues.  He failed to show that the amount he paid for the education was substantially more than the market value of the educational benefits received, and he failed to show that he intended to make a gift of any excess payment.  (See Nonprofit Issues®, 12/16/08.)

3/17/2010