Private school tax: exempt tuition, taxable edges and three filing structures

Tuition is exempt — the edges are where HST lives

The education exemption covers instruction at the elementary and secondary level regardless of who owns the school, and it does not depend on the student's residence — international student tuition is just as exempt as local tuition. But the exemption does not cover everything a school invoices, and the sidelines behave differently:

Once taxable sidelines pass $30,000, the school must register and charge HST on those lines only — and may claim input tax credits only on costs tied to them. That allocation has to be defensible, which means the bookkeeping needs to separate the uniform shop from the classroom from day one.

Three structures, three filing lives

Which return the school files each year depends entirely on how it was set up. A for-profit school files a T2 and pays roughly 12.2 percent combined Ontario tax on its first $500,000 of active income, with instalments once tax passes $3,000. A non-profit school still files a T2 every year despite owing nothing, and adds the T1044 information return once investment income exceeds $10,000 or assets exceed $200,000. A school that is also a registered charity files the T3010 within six months of year-end, may issue donation receipts, and claims the PSB rebate — 50 percent of federal HST and 82 percent of the Ontario part — on costs the exemption otherwise makes unrecoverable.

Religious schools get one more tool: under CRA's long-standing IC75-23 policy, the portion of tuition attributable to religious instruction at a charitable religious school can be receipted as a donation. The split must be calculated from the school's actual costs each year, not guessed — done properly it is a meaningful benefit to parents; done casually it is an audit finding. And for growing for-profit groups running two or three campuses through separate corporations, remember the associated-corporation rules: one $500,000 small business limit is shared across the group, so the second campus does not bring a second low-rate bucket with it.

The receipts parents ask for, and what they can actually claim

Private K-to-12 tuition is not eligible for the tuition tax credit — the T2202 world starts at post-secondary — and schools that imply otherwise create problems parents inherit. What parents can claim is narrower and depends on paperwork only the school can produce. The childcare component of fees — before and after care, and the care portion for young children — supports the child care expense deduction if the school issues a receipt that breaks it out separately. For students with learning disabilities or other impairments, tuition can qualify as a medical expense where a qualified practitioner certifies that the school's facilities are what the child requires. We build the receipt templates once, so February is administration rather than research.

One receipt a charitable school can never issue: a donation receipt for tuition itself. Fee-for-service payments are not gifts, and arrangements that dress tuition up as donations — a "voluntary" gift that happens to equal the fee reduction a family received — are a receipting offence CRA has pursued for decades. The IC75-23 religious-instruction split and genuine bursary-fund gifts from families with no student benefiting are the compliant routes, and we keep the two clearly separated in the records.

A school year, from our side of the desk

September: enrolment deposits and prepaid tuition set up as deferred revenue so income lands in the right fiscal year, with refund obligations visible as liabilities rather than buried in revenue. February: T4s for teaching staff, childcare and donation receipts out to families. Year-end: the T2, T1044 or T3010 filed to match the structure, HST registration and allocations reviewed against what the sidelines actually earned. Schools recruiting international students or paying US curriculum licensing fees have a second file — that lives on our private school cross-border tax page. The full engagement menu is on our tax services page: boutique, cloud-first, fixed fees quoted after a discovery call.

Source: CRA — GST/HST for businesses.