Po$$ible Tax Changes for Employer Tuition A$$i$tance

September 2, 2010

Do you know someone whose employer is providing tuition assistance? It´s a great benefit, right? Especially since, at this moment, those tuition dollars are not counted as taxable income for the student. If it were, the student would have to pay extra income tax on that tuition assistance. But that could easily change.

The tuition exemption is possible because of something called Section 127. Section 127 of the Internal Revenue Code has made it possible for millions of employees to take advantage of employer tuition assistance without the sting of tax liability. However, that law may no longer exist after this year. Under Section 127, an employee may exclude from taxable income up to $5,250 per year in employer-provided educational assistance at the undergraduate and graduate level regardless of whether the education is job-related. This provision is currently set to expire at the end of 2010.

CAEL is a member of the Coalition to Preserve Employer Provided Education Assistance (CPEPEA) which supports public policy that will make Section 127 permanent.

Section 127 is one of the only tax benefits that targets working learners, encouraging employers to offer tuition assistance. According to a recent SHRM survey, about 913 million people received Section 127 benefits in the 2007-08 academic year. The average age of Section 127 undergraduate recipients was 37 years old, and the average income was $42,711. This data suggests that Section 127 is making a difference for all workers, not just younger people or highly paid professional staff.

There is promising activity on the Hill in support of Section 127. On June 24, 2010, Representative Earl Pomeroy (D-ND) and Representative Sam Johnson (R-TX) introduced H.R. 5600, the Employee Educational Assistance Act of 2010. This bill would make Section 127 a permanent part of the tax code. Senator Chuck Grassley (R-IA) has also introduced a higher education tax bill (S. 2851) that will make permanent several educational tax provisions, including Section 127.

There are several ways you can help:

  • Write to your representatives to ask them to co-sponsor H.R. 5600. CPEPEA can provide you with a template letter.
  • Provide testimony on the impact of Section 127, especially if you are an employee or employer.
  • Get the word out.

This Information was taken in its entirety from:  Council for Adult and Experiential Learning (CAEL) Forum & News https://app.e2ma.net/app/view:CampaignPublic/id:28750.8587460856/rid:4f9ba872eb588b7a733a0ff6d8e74de3

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