Starting a private school that my kids will attend

[Kim NR]

I have a client in Massachusetts that is starting a private school for 1st and 2nd graders. She is going to be the head administrator. She has hired two teachers which she will pay a salary. She is charging tuition for each student except her own two children. I was thinking that the value of the tuition for her two children should be considered income for her business. But, I am unsure if it should actually be treated as a tax free benefit. She is not being paid a salary. Any thoughts?

[qbteachmt]

"Any thoughts?"

You posted in the Community for peer users of ProSeries income tax preparation program. I'm not seeing a tax program or preparation or filing question.

Tuition remission is not taxable if it meets the nondiscriminatory rules. You can give differing benefits to Admin vs Teaching staff.

You didn't state which type of entity they want to operate under, if they got their approval from the local school district per MA requirements, etc. You also didn't mention if this is an Independent private school or an Affiliated private school.

Everything matters; and more details for what help exactly you are looking for, would be helpful, too.

[Kim NR]

Sorry I posted in the incorrect place. I do appreciate your answer though.  She has been approved as a school. It is a private school and she will be a LLC filing as a disregarded entity therefore using schedule c. For her to use tuition remission would she also have to offer that benefit to the two teachers as well if they have children enrolled?

[qbteachmt]

"therefore using schedule c."

Then there cannot be Salary for her, anyway. This entity type isn't allowed to pay an owner via payroll.

"For her to use tuition remission would she also have to offer that benefit to the two teachers as well if they have children enrolled?"

This is more of a legal question for that State, really, since they are employees. As I noted, you cannot discriminate, but you can set differing benefits for Admin vs Staff. Many times this is used as incentive against poor pay rates.

[Kim NR]

I agree with you about it not being a salary, but would it be income for the business was my question.  Would you agree if it is remission it’s not taxable but if she does not qualify then it would be taxable income for the business? I guess I need to find the answer with a lawyer regarding remission or not. 

[qbteachmt]

"but if she does not qualify"

It isn't her that needs to qualify. It's the operation. The school cannot be discriminatory.

Yes, pretty much everything you asked and also what hasn't been asked is all legal issues. That State looks to have lots of great resources for this.