<p>Ok so I am sure that someone has brought this up on CC but I am wondering why deposits are not tax deductible if you decide to attend another college. Let me elaborate. </p>
<p>So your S or D is on the waitlist to their dream school. The waitlist school reports that they will not make any decisions on the waitlist until May 15 or worse yet sometime in June. So you send in a deposit to hold a spot at one of your accepted schools. Then your waitlist school comes through and therefore you forfeit your deposit at the accepted school. Why isn’t the forfeit deposit a charitable contribution to the college and therefore tax deductible? IRS states as long as you did not receive a service or product or something of value in return for your contribution. Is receiving a spot in the freshman class a service, product or something of value?</p>
<p>I like the way you think…totally agree…maybe taxguy can chime in…curious to know how the college accounts for these unused deposits on their balance sheets??</p>
<p>3bM: an enrollment deposit is designed to offset a tuition bill for the future; not sure there is any value attached to “holding a spot”…</p>
<p>Curious what others have to say; no vested interest, just curious.</p>
<p>I personally think that $500 is a heckuva lot to charge to “hold a place.” I’d be willing to test your theory by taking a charitable deduction for the deposit…IF my tax accountant thought I could get away with it. I’ll be interested in hearing what the tax code specialists on this board have to say about your question.</p>
<p>You DID receive something of value for your deposit: an assurance that your S or D has a place reserved for him or her for the upcoming year. It’s insurance. You are hedging your bets. Insurance isn’t tax-deductable, either, even if your house hasn’t burned down/been robbed/been carried off by tornadoes. </p>
<p>Just because the school is a nonprofit organization doesn’t mean that the deposit can be considered a contribution. For another timely example, let’s say that the school is selling off some art. You are interested in one of the paintings, but are aware that other people might be interested in it, as well. You are asked to put down a deposit towards the purchase price. Complicating things, you’re aware that another painting that you really really really want is about to come on the market, one you’d like even more than the one you’ve put down the deposit for. You don’t have enough money to buy both, but you could afford to pay for the one you love more and the deposit on your second choice. Happy day, your bid on the “dream” artwork is accepted, and you happily cut the purchase price check and give up the deposit on the second choice painting. Would the IRS, or anyone, consider your deposit a charitable donation? Uh-uh.</p>
<p>You buy a full meal plan for your kid at college… who goes on a mostly liquid weight loss diet in October. The uneaten meals do not constitute a charitable deduction, and frankly, I’m not sure why I as a taxpayer should be subsidizing your right to “reserve” meals which your child then chooses not to eat.</p>
<p>When you make a deposit for most things, it is to guard against possible lost to the seller if you should back out of the deal. In this case with school deposit, most schools are able to fill their space with WL applicants, therefore there is no financial lost to the schools. I don’t understand why the money shouldn’t be refunded back to you if they are able to fill your spot with another applicant.</p>
<p>Actually, there are two considerations for tax deductibility: 1) did you receive “value”; and, 2) how much was that value? In other words, you send in $1,000 to a charity for a dinner and you receive a meal worth $100 - your tax deduction is $900. If you later have a conflict and cannot attend, and inform the charity in advance to “donate” my seat, then you could deduct the whole amount of $1,000 as a contribution to their dinner. Thus, what is holding a seat at xx college worth, if only for 2-6 weeks?</p>
At all the of the schools my kids attended, as well as most of the ones their friends did, the deposit was just that: a deposit. It was NOT offset towards tuition.</p>
<p>There is a huge value to holding a spot. Without it, you don’t have a spot.</p>
<p>
But not as a charitable contribution. You can’t change the nature of the payment just because your child chose not to attend. Just because you make a payment to a charity, does NOT make it deductible. If you buy a lottery ticket, for example, it is not a charitable contribution, even if you lose.</p>
<p>3bm103 – Whoever said that Health Insurance is a charitable deduction? I sure didn’t. Neither did Slithey. But Slithey did make the statement that “insurance isn’t deductible.” In the case of homeowner’s insurance that is true, sort of (I believe the portion that is applied to a home office is). In the case of health insurance, it may be deductible if it helps push your out-of-pocket medical expenses over your individual allowable limit.</p>
<p>This tax stuff is complicated, and the questions really should be answered by the tax pros on this board. So I’ll shut up since I’m just an interested amateur who has an interest in ALL legal deductions that might allow me to keep a few extra cents of my earnings.</p>
<p>Time period for YOU is not relevant. The school is selling you a 3 month option (May - August), regardless of whether you only want a 2-6 week option.</p>
<p>From the school’s perspective, once you pay the deposit, YOU HAVE THE RIGHT to tie up the spot until tuition payment is due (August?). That enrollment spot is a WASTING asset to the school. If you miss the tuition payment, they may or may not be able to find another student to take your place.</p>
<p>There are two possible values:</p>
<p>1) Student enrolls - There is no donation, so the issue is moot.</p>
<p>2) Student does not enroll - It can be argued that $100 is cheap (option has more than $100 value, thus you get no donation value) considering the potential loss to the school is $20,000 or more in lost tuition (school can’t adjust their expenses to offset the loss).</p>
<p>When the odds of not filling the seat is slim or nil (such as for Harvard), then you can also argue that the $100 deposit pays the administrative cost of the breakage (school has to maintain a waitlist, process your dis-enrollment, select and find a replacement, quickly enroll a new kid, process their financial aid, etc.).</p>
<p>Job Education expenses are deductible on Schedule A, line 21. Expenses in generating income are generally deductible if they contribute to income - that’s a pretty fair concept. It’s similar to a benefit at many large companies - tuition reimbursement. Companies do it because there’s a tax benefit to do so too. We have the Lifetime Learning Credit and the Hope Credit and tuition deduction but these are inadequate at all but community college.</p>
<p>How about making college tuition and fees deductible as they should result in employment and tax revenues down the road?</p>
<p>It’s not insurance, it’s an option. That has economic value. How much value? Well, what the market will bear, in this case $500. </p>
<p>A charitable contribution is a gift. A gift requires donative intent. When you pay the deposit, you don’t do so with the intent of gifting money to the college. You think you’re getting something of value, a guaranteed spot in the entering class. If you later elect to walk away from it, it’s not because you’re deciding at that point to give money to the college—at that point, it’s no longer your money to give. </p>
<p>It’s just like putting down “earnest money” on a real estate transaction. If you close, that money goes toward the purchase price. If you walk away, you forfeit the deposit. It’s not a gift to the would-be seller, it’s a straightforward economic transaction; you’re getting something of value, namely that the seller is agreeing not to sell to someone else until you either close or forfeit. Nor would such a transaction become a tax-deductible charitable contribution if the seller of the real estate were a 501(c)(3) tax-deductible not-for-profit, like a church or a school.</p>
<p>I don’t disagree, but my point was more philosophical. What is the TRUE FMV, bcos that is the only way to even consider a deduction.</p>
<p>bclintock: OperaDad buys seasons tix to the Opera, but has a business conflict and cannot attend on Thursday night. He calls the box office and "donates’ his seat back to the Opera for that night which they then resell at the walk-up window (or give away). OperaDad earns a deduction for those tix, even if they cannot resell them!</p>
Only if they are required to maintain your current position. They are NOT deductible on schedule A in order to get a degree that qualifies you for a new job.</p>
<p>Either way, that enrollment deposit is not a charitable contribution.</p>