Congressional Action Needed to Extend Exclusion of Tuition Remission From Taxable Income

This is a reminder regarding possible changes in the tax code related to taxable tuition benefits. Section 127 of the U.S. tax code, which allows an employee to exclude from taxable income up to $5,250 a year in employer-provided tuition assistance benefits for undergraduate and graduate-level courses, will expire at the end of the year unless the U.S. Congress takes action to extend the provision. If the current provision expires, all graduate level tuition remission would be taxable for all employees, not just dependents. In addition, tuition remission for undergraduate level tuition remission (currently exempted for employees and dependents) would be taxed.

This provision was first established in 1978 and has been extended by Congress several times, most recently in 2001. This year Representative Earl Pomeroy (D-ND) and Representative Sam Johnson (R-TX) introduced the Employee Educational Assistance Act of 2010 (H.R. 5600), which would make the provision permanent. Senator Chuck Grassley (R-IA) introduced a similar bill (S. 2851) in the Senate.

You may show your support of these bills extending the taxable income exclusion of employer-provided education assistance by contacting your members of Congress. To do this, visit www.capwiz.com/cpepea/home/ to write or call your member of Congress.

Please note that Congressional action on the income tax treatment of tuition remission does not alter tuition remission as a benefit to USM employees.

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