Clarification/Follow-up by Jim.McGinness on 06/06/06 12:18 am:
This "something" is too vague. If you "pay for something", it is hard to see how you would get the same "something" in exchange for a supposedly charitable contribution. The value of the "something" would normally reduce the amount you are allowed to deduct.

This would lead me to suggest taking the pre-tax route.

If you are on top of your withholding throughout the year, you can avoid giving the gov't a free loan. So that's not necessarily a criterion for choosing on over the other.

Clarification/Follow-up by rosends on 06/06/06 8:09 am:
I can have my kids' tuition taken pretax, or make a donation to the school (fully tax deductible) for the same amount after earning the money.

If the tuition is 1000 and the donation would be 1000, is there any difference when I make the payment?

The Parent council is trying to get everyone to buy in to doing the donation so that the school won't have to raise tuition - but since I pay tuition pre-tax, is there any differnece for me?

Clarification/Follow-up by Jim.McGinness on 06/06/06 8:17 am:
Tuition payments for your children are not normally eligible as a pre-tax payment (this might not apply if you're in special circumstances related to the school: a school employee, perhaps). Donations to a school in lieu of tuition are, as I mentioned, subject to the problem that the value of donation must be reduced by the value of the service provided. (There is no problem for donations in excess of tuition.)

Therefore, neither of your options sounds right for an ordinary person. You should discuss your options with a tax professional who knows the details of your situation and the legal requirements of your location (I've been assuming you're in the US.)

Clarification/Follow-up by rosends on 06/06/06 9:16 am:
I'm in the US, but both options are actually valid -- as a school employee, pretax payments are the norm (from one private school to another) and the donation would be instead of the tuition and would not be for any service, just a voluntary contribution (which would then reduce the future need to increase tuition).

Clarification/Follow-up by Jim.McGinness on 06/06/06 9:36 am:
You're correct, the arrangements for school employees are different.

You, personally, should prefer to pay pre-tax, since that benefit is well established and keeps things easier for you. The school should not care, either way, since they get the same amount of money.

For the parent organization to prefer donations makes sense for people who do not have the option to pay tuition from pre-tax dollars, but it is questionable in the sense that requiring donations in lieu of tuition (tuition is the fee or payment for the service of schooling a student) could eventually be ruled an improper tax evasion.

Clarification/Follow-up by rosends on 06/06/06 9:55 am:
I think the school is not "requiring" it -- the parents want to forestall the increase by "volunteering" the money. Evasion, maybe...meanwhile, as far as I'm concerned, are the tax implications the same?

Clarification/Follow-up by Jim.McGinness on 06/06/06 10:00 am:
It depends. Some benefits which are paid for with pre-tax dollars are not considered pre-tax for FICA withholding, others are. If you also avoid Social Security taxes on your pre-tax tuition payments, you should still prefer to do things that way. (Of course, some institutions are not subject to Social Security withholding, in which case this consideration is also a wash).