You can now deduct education expenses from income: everything you need to know to reduce tuition fees

The Federal Public Revenue Administration (AFIP) has made it possible to complete the online form for the deduction of study cost in the Income tax for tax year 2022 onwards, required for non-arm’s length employees to begin reporting deductions to their employer.

The deduction of expenses education of Benefits It was incorporated by law 27,701 of the 2023 budget, as part of the tax benefits that were to be included in the negotiation between the ruling party and the opposition. Beneficiaries will thus be able to reduce their tax payments for expenses incurred both last year and those to come. Later it was regulated by Decree 18 of 2023.

A tax analysis Sebastien Dominguez of the SDC Asesores Tributarios has focused on some of the most important aspects of the regulations.

1️⃣ The education costs of who they are”family responsibilities”:

Taxpayers can deduct certain bills related to the education of their sons, daughters, sons-in-law or daughters-in-law under the age of eighteen or who are unable to work and for those over the age of 18 and up to and including 24 (in the latter case to the extent that they pursue regular or professional studies of an art or a trade which prevent them from acquiring the means necessary to meet their needs), as long as they have for them the status of charge of family, explained the specialist.

To have the character of dependents, they must be dependent on the taxpayer and not have income exceeding the non-taxable minimum profit for the corresponding year.

For 2022 and 2023 the revenues to be considered are:

In the case of children of legal age and up to the age of 24 mentioned, the deduction is applicable to the extent that they are resident in the country under the terms of Section 33 of the Income Tax Act and have no income net of all kinds of income during the year, real or presumed, benefits and/or periodic or contingent income – except when they constitute the reimbursement of capital – in excess of the amounts mentioned.

According to this very broad definition, one could consider that the “quotas” are periodic entries. If this is the case, for example, if a child received “allowances” in 2022 for amounts greater than $252,564.84, the education costs would not be deductible.

“It is not at all reasonable, and this type of money given by parents to their children, or given by other relatives such as grandparents and uncles, should not exclude the possibility of deducting the expenses,” Domínguez said.

“Remember that a minor, from the age of 13, can open a bank account and the AFIP could detect the allowances transferred there,” he added.

2️⃣ The notions of costs to be deducted

The notions of expenses to be deducted are:

A. educational services; And

b. The purchase of tools for education.

Decree 18/2023 regulates these two concepts as follows:

Educational services include:

1. To services provided by public and/or private educational institutions incorporated in official educational plans and recognized as such by the respective jurisdictions, referring to education at all levels and grades contemplated in said plans, and postgraduate education for secondary, tertiary or university graduates, as well as the catering, accommodation and transport services ancillary thereto, provided directly by said establishments with their own means or those of others.

2. Courses given privately on subjects included in the official teaching plans detailed in the previous point and whose development responds to them, given outside the educational establishments indicated in the previous point.

3. To kindergarten nurseries and kindergartens.

For example, they are included:

-The ace private tuition fees of the city of Buenos Aires incorporated into the official education plans with the recognition of the Ministry of Education as well as the Lunch service to be paid to the school.

– Payments of Tutorials of the assistance granted to the student who attends the private school indicated above.

– Fees paid to childcare centers.

“It would have been important for the regulations to expressly consider kindergartens as well as crèches and kindergartens and nurseries. However, we understand that they must be included because it does not make sense that only these establishments are left out and that nurseries, kindergartens and infant gardens, primary, secondary, etc. be included,” analyzed the tax official.

“In this sense, the Supreme Court considered the kindergartens included in the expression crèches and kindergartens and infants with regard to the VAT exemption for educational services in the Delphian SA case of 23/12 /2004. Although it is another tax, the same conclusion must be drawn with regard to income tax regulations,” added Domínguez.

Re tools for educationthe decree indicates that are included:

1. School supplies

2. Dust covers; And

3. Uniforms

“In our opinion, the regulations are very restrictive and go back many years, because they should include all necessary and current tools for education, such as computers, laptops, tablets, software for educational purposes , etc.”, noted the specialist.

3️⃣ The Maximum quantity deduct

The law establishes that the maximum amount to be deducted is limited to 40% of the amount of the tax-free minimum profit corresponding to the fiscal period, explains the analysis.

Therefore, the limits of the deduction are:

The maximum savings for a taxpayer paying taxes at the rate of 35% is:

“In summary, if a taxpayer has 2 dependent minor children, sends them to a private school and pays $800,000 in tuition in 2022, he could deduct $8,418.83 on a monthly average and save a maximum of $2,946. $.59 on average per month, if so. taxed at 35%,” Domínguez explained. “That is, the savings would be $35,359.08 per year, or a 3.53% benefit on the stock value of $800,000,” he added.

“The incorporation of this deduction is important and a step forward in considering the expenses that families must incur for the education of their children. However, the deduction limit is very low and applies to all education expenses and associated tools available to the taxpayer, regardless of the number of children, stepchildren, etc. “, Estimated the tax agent.

“Therefore, we understand that a limit should have been applied for each child, son-in-law, etc. independently and gradually increase it in future years until it reaches, at least, an equivalent amount. 100% of non-taxable profit,” he concluded.

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