Question

Page 5-7 (Section 5-4a) of the text mentions “qualified tuition reduction plans” under which an educational institution may reduce or pay the tuition for its employees, and the employees will not be taxable on the assistance. United Stats Law

• What criteria are used to determine whether the employer qualifies to provide nontaxable qualified tuition reductions or payments under such a plan?
• Which individuals may receive the nontaxable qualified tuition reductions or payments?
• Are there circumstances in which a tuition reduction or payment made by a qualifying employer for a qualifying individual will nevertheless be taxable to the employee? If so, describe these circumstances.

Please answer each question in complete sentences, and cite the title and number of the IRS publication or form/instruction where you found each answer, and the page number on which the answer is found. Use your own words in the answer – do not copy the IRS’ language. Spelling and grammar count. This assignment is worth 5 points.

Answer 1

Brief Explanation of  Qualified tuition reduction plans”

Section 117 (d) of the Internal Revenue Code allows nonprofit universities to give their employees, spouses, or dependents tuition reductions that are excluded from taxable income. This help employees and their family members in their college studies providing an important benefit to many middle- and low-income college employees

• What criteria are used to determine whether the employer qualifies to provide nontaxable qualified tuition reductions or payments under such a plan

Ans - As per the record person who earning is less are able to get the benefit of qualified tuition reduction plans. People whose earnings are below $25000. $50000 & $75000 are the major people who are getting the benefit of this. Reason behind this as there earning is low they force to borrow money to complete their studies, which lead debt to avoid such scenario “qualified tuition reduction plans” has been bought in to action.Dependents children is eligible , who is less then 30 years old .Retired and their spouses who have completed 50 years.

• Which individuals may receive the nontaxable qualified tuition reductions or payments?

Ans - Qualified tuition reduction plans is available in most of the university and college. Employees from all any sector of industries be it public or private are eligible in respect of his occupation for example Security guard, waiter at hotel, Gardener etc. may receive tuition remission either for themselves and/or their family members.

• Are there circumstances in which a tuition reduction or payment made by a qualifying employer for a qualifying individual will nevertheless be taxable to the employee? If so, describe these circumstances.

Ans - Employees enrolled in graduate-level programs are subject to taxation it does not matter for level of class he/she has taken admission when the discounted tuition amount exceeds $5,250 within the tax calendar year The full amount of the tuition discount on any level of classes taken by eligible family members enrolled in graduate-level programs is taxable to the employee. .Employee whose waiver are exceeds threshold amount $5,250 within the same tax calendar year are taxed but most employees do not exceed the threshold until the Fall semester and are taxed in November and December