Tax Reform Impact on Private Education

Take Action on the Tax Cuts and Jobs Act

We ask you to take immediate action to give Congress input from the Christian school community on key parts of tax reform legislation that will impact Christian schools, educators, and families across the country. Please contact your legislators and the President. Please also alert your Christian school community early this week and call them to action before this bill becomes law.

Summary

The U.S. Senate passed its version of the Tax Cuts and Jobs Act in the early hours of Saturday morning, December 2. The House passed its bill November 16. The two chambers must reconcile their bills in conference committee, a process that begins this week. We want to notify all of our legislators to urge the conference committee to keep the following four provisions in the final bill.

  1. The final bill should retain the Senate's expansion of 529 Savings Accounts. Both the House and Senate now allow savings for elementary and secondary school expenses in 529 Savings Accounts—though the Senate's language is broader. Expansion of 529 accounts will help parents save for their children's education during their K–12 years as well as for college.
  2. The final bill should preserve Sec. 117(d) as provided in the Senate bill. This section of the Internal Revenue Code allows schools to provide tax-free tuition to the children of teachers and other staff. This is an important benefit for teachers who often already make sacrifices for the greater good. The benefit also helps schools recruit quality staff. Regrettably, the House version taxes this benefit as income. Christian high school tuition averages $9,000 per child. If the House prevails, a teacher who receives the benefit will be taxed on $9,000 of additional income per child and the school will face additional employer payroll taxes for every teacher/staff member who receives the benefit.
  3. The final bill should retain Sec. 127(a) as provided in the Senate bill. This section allows schools to provide employees up to $5,250 per year tax-free in educational assistance. This is a valuable tool for schools to recruit high-quality teaching and other staff. If the House version prevails, this benefit will be taxable as income. 
  4. The final bill should preserve the Senate version's doubling of the teacher deduction for classroom expenses to $500. Doubling the deduction will be a great help to educators. The House bill eliminates the current $250 deduction for teacher classroom expenses altogether.  

Sample Letter to Parents 

Forward this email to parents at your school so they can contribute their perspectives, as well!

Dear Mr. Smith,  

Congress has taken major action on tax reform this week, and we are asking that you join us in communicating to our legislators and the President our support for four provisions of the current tax reform bill:

  • Supporting the ability of parents to save for their child's K–12 education
  • Preserving tax-free tuition to the children of teachers and staff
  • Allowing schools to provide tax-free educational assistance to staff
  • Doubling teacher deductions for classroom expenses

Visit ACSI's Action Center to find prepared messages that you can use to contact your Members of Congress.

Please urge other families to do likewise; it is vitally important for the Christian school community to speak up at this time. You can find more information on these issues at acsi.org/LL

Respectfully,

XYZ Head of School

Further Resources and Talking Points

Download a PDF of the Talking Points

The House and Senate are now working to reconcile the two versions of the bill before Christmas. Make your voice heard!

Tell your own story when communicating with elected officials. Your personal account of how you benefited—or would no longer benefit—from the following measures can have a strong impact. Tell your elected officials what difference it made for you when you received tax-free tuition remission for your children or continuing education thanks to tax-free employer-paid additional college courses.   

The final bill should retain the Senate's expansion of 529 Savings Accounts. Both the House and Senate now allow savings for elementary and secondary school expenses in 529 Savings Accounts. The Senate's language is broader and is the preferred version.

  • Savings grow free of tax. Distributions not taxable when spent on qualifying expenses. Christian school tuition is a qualifying expense under the measure. Up to $10,000 per year may be used.  
  • Sen. Ted Cruz (R-Texas) offered the 529 expansion as an amendment to the Tax Cuts and Jobs Act (tax reform bill). The Vice President dramatically cast the tie-breaking vote (51–50) in a significant victory for education choice.
  • Expansion of 529 accounts helps parents save for their children's education during their K–12 years as well as for college. Ensuring children receive an education that meets their individual needs is a central responsibility of parents.
  • Presently, more than 75 percent of 529 savings plans are from families making $150,000 or less. A total of 13 million 529 savings plans have been set up, with assets totaling nearly $300 billion. The popularity of 529 savings plans demonstrates the broad interest in this form of tax-advantaged savings, including among working-class and middle-income families.  
  • See "Ted Cruz's 529 Education Savings Amendment to Tax Reform Is A Big Win for Families," by Ryan Ellis, Forbes, December 4, 2017.

The final bill should preserve Sec. 117(d) as provided in the Senate bill. Section 117(d) of the Internal Revenue Code allows schools to provide tax-free tuition to the children of teachers and other staff. The House version makes the benefit taxable, thus adding it to a teacher's taxable income.  

  • This is an important benefit for teachers who already make sacrifices for the greater good.  
  • Tuition remission helps schools recruit quality staff.  
  • Tuition remission is not limited to helping teachers; it can help all staff members.  
  • The average Christian school teacher earns $31,000. The average high school tuition is about $9,000. The House version would cause a teacher earning $31,000 to be taxed on an additional $9,000 of "income" for each child who receives a tuition reduction.  
  • A teacher with two children in high school who receives a tuition reduction earns $31,000 but would pay taxes on an additional $18,000 of "income"; her taxable income would be $49,000.  
  • The cost falls not only on teachers/staff, but also on the school that employs them. Under the House bill's language, the school must pay additional payroll taxes on the tuition benefit for every employee who receives the benefit. Payroll taxes will be based not on the $31,000 average salary, but on the $49,000 in salary and benefits for each employee.    

The final bill should retain Sec. 127(a) as provided in the Senate bill. Section 127(a) of the Internal Revenue Code allows schools to provide employees up to $5,250 per year tax-free in educational assistance.

  • This is a valuable benefit that helps schools recruit high-quality teaching and other staff. If the House version prevails, this benefit will be taxable as income. 
  • This valuable benefit encourages continuing education and professional excellence. The House version will make it harder for teachers to afford continuing education and schools to provide this capacity as a benefit.
  • Not only will staff members pay taxes on the benefit under the House version of tax reform, but schools also will be faced with paying payroll taxes on it for each staff member who receives it.   

The final bill should preserve the Senate's version, which doubles the teacher deduction for classroom expenses to $500. The House bill eliminates the current $250 deduction for teacher classroom expenses altogether.  

  • Teachers often spend their own money to provide the "extras" that make a difference in the lives of their students.   
  • Teachers do not enter the profession to get rich. Even though this deduction is still modest under the Senate bill, it encourages teachers in their first impulse to go that extra mile. The common good wins the day as entire communities benefit from teacher excellence.

Log in to see the comparison chart of the House and Senate tax bills. (This chart was created before the 529 amendment was added.)