Personal-Finance

Get a tax break for your ‘black tax’

2020-01-24 14:00

Via a crowdfunding platform, you can receive a tax deduction for education costs if you are not related to the beneficiary, writes Maya Fisher-French

Many black professionals carry the costs of educating the future generation. The up side of this commitment is that the young person receiving the education will be able to qualify and obtain a job that helps them not only provide for themselves, but also support extended family and reduce the burden on the few who are already working.

However, this creates a significant financial burden on those young professionals who are just starting out in life themselves.

There is a way to make “black tax” tax deductible.

As long as you are not closely related to the child – as a parent or sibling, for example – you can support the student through a crowdfunding platform called Feenix and receive the contribution as a tax deduction.

Feenix provides a tool for students to formalise their fundraising efforts and a channel for funders to find students they wish to support.

As Feenix is a public benefit organisation, all bona fide donations are deductible from a person’s income in terms of section 18A of the Income Tax Act. All community members (except direct family) are able to download a section 18A tax certificate if they donate to a student.

The student needs to register on the Feenix website (feenix.org) and their profile is then verified to make sure they are a bona fide student. Feenix helps the student create a social media profile in which they tell their story – how much they need, what they are studying and so on.

Once a student has registered, they are able to reach out to their communities, such as friends, individuals and businesses, that can all contribute to their funding.

As the donor, you can contribute to the education costs via the platform and receive your section 18A tax deduction. Keep in mind, however, that 5% of your contribution goes to administration – only 95% goes towards the education costs.

The funds are paid directly to the tertiary institution and do not go via the student. All outstanding debt is verified with the universities beforehand to make sure no overpayments are made. Students have to submit a fee statement from their university when registering a profile, which is verified by Feenix. Only costs on this statement are covered by Feenix. The costs on the fee statement may include tuition, accommodation (at registered residences) and textbooks.

Feenix chief operating officer Leana de Beer says: “By connecting students to individuals and businesses, we are creating a sustainable education funding model for South Africa.”

De Beer says the crowdfunding platform was co-created with students, and started in 2017 as a digital space where businesses and individuals could be able to donate funds for debt-free tertiary education.

Apart from securing funds, Feenix could also create potential long-term employment opportunities for students by connecting graduates with businesses on request.

“Through the matchmaking process, donors can identify students they want to donate to. Even though all communication between students and donors is facilitated through Feenix, donors can receive progress reports of the students they fund. After graduation, should the corporate donor wish to get in touch with the student regarding employment opportunities, this can be arranged through Feenix,” De Beer says.

Although students are not required to repay the funds they receive, Feenix encourages beneficiaries to pay it forward by helping their peers to raise money or by becoming donors themselves once they have found jobs.

“We often see former beneficiaries returning to the platform as donors, like Khanyisile, a psychology honours student at Wits who raised the R36 000 she needed to graduate debt-free in 2018. She has since returned to Feenix this year as a donor,” says De Beer.


Maya Fisher-French
Personal finance journalist
City Press
p:0117139001
w:www.mayaonmoney.co.za  e: maya@askmaya.co.za
      
 
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March 29 2020