The Economics of Section 170: A Case for the Charitable Deduction of Parochial School Tuition


That payments for parochial school tuition are not deductible under Section 170 of the Internal Revenue Code is a foregone conclusion in the eyes of many tax policy scholars. Tuition provides an easy case because the donor receives something of great value in return for his donation: the education of his children. This Article questions that conclusion. By taking a close look at the economics behind these tuition payments in the context of a discrete population, the religious Jewish community, I show that traditional economic assumptions are inappropriate for analysis of those payments. Rather than a traditional economic exchange for economically valuable services, tuition payments should be characterized as payments made for unique and vital religious services-payments in exchange for an intangible religious benefit. The benefit of education, so characterized, is not different from many other intangible religious benefits for which corresponding payments are fully deductible. With that observation, I apply traditional tax policy analysis and the policy justifications for Section 170 to payments for parochial school tuition and present an argument for the deduction of tuition payments.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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