Issue Snapshot: Qualified Tuition Reduction Benefits Provided by Educational Organizations

The IRS Tax Exempt and Government Entities Knowledge Management team periodically issues updates and research findings known as “Issue Snapshots” on tax-related issues for accounting professionals. Recently, the IRS issued a general reminder related to qualified tuition reductions offered by educational institutions to their employees.

As the law currently stands, free or reduced tuition provided by eligible educational institutions to its employees may be excludable from gross income as a qualified tuition reduction. Whether a tuition reduction is a “qualified” tuition reduction and excludable from income depends on whether it is for education below or at the graduate level and whether the tuition reduction represents payment for services.

The important takeaway from the Issue Snapshot is this: qualified tuition reduction benefits do have to follow certain rules to be a considered a tax-free benefit to the educational institution’s employees. This may be a good time to review your qualified tuition reduction benefit with your CPA to ensure that the benefit still meets the proper requirements. Ellin & Tucker’s not-for-profit services group professionals are able to assist.

For more information, visit the Qualified Tuition Reduction Issue Snapshot on the IRS website.