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Tax Relief for Tuition Reimbursement

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Wed Jan 16 2013

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As part of The American Taxpayer Relief Act (HR 8), the legislation passed by Congress to avoid a “fiscal cliff” and maintain tax cuts and long-term unemployment benefits among other provisions, another piece of the bill is a big win for employers and employees. Section 127 of the IRS Code—employer-provided tuition assistance—is now a permanent part of the Code.

Section 127 enables an employee to exclude from his or her income up to $5,250 per year in employer-provided tuition assistance for any type of educational course, undergraduate or graduate. Employers who use this benefit can deduct these costs as a business expense when determining their income tax liability.

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Section 127 was originally established in 1978 as a five-year provision to give officials time to study it. Since then it has been extended nine times—in some cases retroactively after it had expired—and most recently in 2010 for two years (through December 31, 2012). 

ASTD was a member of The Coalition to Preserve Employer Provided Education Assistance (CPEPEA), a group that advocated for the permanent extension of Section 127 for the last several years. More information about the coalition’s work may be found at www.cpepea.com.

Do you or your organization utilize the benefits of Section 127? If so, we’d like to know! Please reach out to me: [email protected].

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