The government regulated the deduction of education expenses in it Income Tax for the fiscal period 2022 and following through Decree 18 of 2023, published this Friday in the Official Gazette. Although the AFIP regulation is still missing, necessary so that employees in a dependency relationship can begin to report deductions to their employers, the regulation details how taxpayers will be able to benefit.
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The deduction of expenses education of Profits It was incorporated by Law 27,701 of the 2023 Budget, as part of the tax benefits that were intended 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 made both last year and in future ones.
A tax analysis Sebastian Dominguez of SDC Asesortes Tributarios stopped on some of the most important aspects of the regulation.
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1️⃣ The education expenses of who they are “family burdens”:
Taxpayers may deduct certain costs linked to the education of their sons, daughters, step-sons or step-daughters under eighteen years of age or disabled for work and for those over 18 years of age and up to and including 24 years of age (in the latter case to the extent that they are pursuing regular or professional studies of an art or trade that prevents them from providing themselves with the necessary means to support themselves), as long as they have the status of family burden for them, explained the specialist.
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To have the character of family responsibilities, they must be in charge of the taxpayer and not have income greater than the minimum non-taxable profit of the corresponding year.
For 2022 and 2023 the income to consider are:
In the case of children of legal age and up to 24 years mentioned, the deduction is applicable to the extent that they are residents in the country under the terms of article 33 of the income tax law and do not have net income of all kinds of earnings in the year, real or presumed, benefits and/or periodic or eventual income -except when they constitute the reimbursement of capital- greater than the amounts mentioned.
According to this very broad definition, it could be considered that “allowances” are periodic entries. If so, for example, if a child received in 2022 “allowances” for amounts greater than $252,564.84, education expenses would not be deductible.
“This is not reasonable at all, 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 expenses,” said Domínguez.
“Let’s remember that a minor, from the age of 13, can open a bank account and the AFIP could detect the allowances transferred to it,” he added.
2️⃣ The concepts of expenses to deduct
The concepts of expenses to be deducted are:
a. educational services; Y
b. The purchase of tools for education.
Decree 18/2023 regulates these two concepts as follows:
Educational services include:
1. To the services provided by public and/or private educational establishments incorporated into the official teaching plans and recognized as such by the respective jurisdictions, referring to teaching at all levels and grades contemplated in said plans, and postgraduate for graduates of the secondary, tertiary or university levels, as well as snack, accommodation and transport services accessory to the above, provided directly by said establishments with their own means or those of others.
2. To the classes given privately on subjects included in the official teaching plans detailed in the previous point and whose development responds to these, taught outside the educational establishments indicated in the previous point.
3. To nurseries and maternal-infantile gardens.
For example, they are included:
– The private school fees of the City of Buenos Aires incorporated into the official teaching plans with recognition from the Ministry of Education as well as the Lunch service to be paid to the school.
– Payments of tutorials of support that is given to the student who goes to the previously indicated private school.
– Fees paid to the day care centers.
“It would have been important for the regulations to expressly contemplate kindergartens together with nurseries and maternal-infantile gardens. However, we understand that they should be included since it is not logical that only those establishments are left out and nurseries, maternal and child gardens, primary, secondary, etc. are included, ”analyzed the tax officer.
“In this sense, the Supreme Court considered kindergartens included in the expression nurseries and maternal-infantile gardens with respect to the VAT exemption for education services in the Delphian SA case of 12/23/2004. Although it was another tax, the same conclusion should be reached regarding the regulation of the income tax”, added Domínguez.
Regarding tools for educationthe Decree indicates that the following are included:
1. School supplies
2. Dust covers; Y
“In our opinion, the regulation is very restrictive and takes many years back, since it should include all the necessary and current tools for education, such as computers, notebooks, tablets, software for educational purposes, etc.,” the specialist remarked.
3️⃣ The Maximum amount to deduct
The law establishes that the maximum amount to be deducted is limited to 40% of the amount of the minimum non-taxable profit corresponding to the fiscal period, explained the analysis.
Consequently, the limits for the deduction are:
The maximum savings for a taxpayer who is paying taxes at the 35% rate is:
“In summary, if a taxpayer has 2 dependent minor children, sent them to a private school and paid $800,000 in fees during 2022, they could deduct $8,418.83 monthly average and would save a maximum of $2,946.59 average per month, if it is that it is taxed at 35%”, explained Domínguez. “That is, the savings would be $35,359.08 per year, that is, a benefit of 3.53% on the value of the shares of $800,000,” she added.
“The incorporation of this deduction is important and is a step forward to contemplate the expenses that families need to make related to the education of their children. However, the deduction limit is very low and applies to all education expenses and related tools that the taxpayer has, regardless of the number of children, stepchildren, etc., “considered the tax officer.
“Consequently, we understand that a limit should have been applied for each child, stepchild, etc. independently and gradually increase it over the next few years until reaching, at least, an amount equivalent to 100% of the non-taxable profit”, he concluded.