Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.The IRS does not require taxation of tuition remission benefits for undergraduate courses, unless the spouse or child is not claimed as a dependent on the employees’ tax return. Tuition remission for spouses and dependents at the graduate level will continue to be taxed. The amount to be taxed will be added to the employee’s paycheck over set pay periods and taxes will then be deducted. The taxpayer then would be allowed to use any education credits on their tax return.
A tuition reduction for undergraduate education generally qualifies for this exclusion if it is for the education of one of the following individuals.
A current employee.
A former employee who retired or left on disability.
A widow or widower of an individual who died while an employee.
A widow or widower of a former employee who retired or left on disability.
A dependent child or spouse of any individual listed in (1) through (4) above.
A tuition reduction for graduate education qualifies for this exclusion only if it is for the education of a graduate student who performs teaching or research activities for the educational organization.
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