Paying for Child's Education

[flosfur]

How can an owner/employee of a small incoporated business pay his/her child's education expenses from the business' general fund/before tax money - estalishement of a Tuition reimbursement program?

Where do I find a document for a Tuition reimbursement program?

[GBurns]

If the child is not an employee and not participating in an employer provided plan, how would this be of any benefit to you?

[flosfur]

The child is mine and if the fees can be paid through the corp, I will save taxes. This way I can take lower pay and save more taxes.

[GBurns]

That was the basis of the question, How and Why would you save taxes? If that was the case everyone would pay everything through a company.

The child might be your but that does not make payment of every item a tax benefit. Buying clothes is not tax free.

I suggest that you get the IRS Publication 970 that covers education programs and credits such as Hope, Lifetime and Coverdell. The IRC code sections should be 127, 529 and 162. You might also look at your state 529 Plans.

Paying anything that is not specifically exempted from income, will make that amount be included in your income and therefore subject to being taxed.

[flosfur]

I know if it was so easy everyone would be doing it. But, again everyone does not know about "Benefits Link" and the expert advise that can be had from the experts on its message board ....

Don't the companies have tuition & ducation reimbursement and scholarship programs for the employees and their children? As far as I know, the money paid out from these programs (IRC qualified, of course) is deductible by the employer and does not impute as income to the employees! Or does it?

Are these programs only available to large companies or can a small company have them too? Hence posting of the question on the board.

I have the Section 529 plan - but that only saves taxes on investment gains (and are relatively new), the Education IRA (I have that too) which was hardly worth the bother until 2002 - it wasn't enough to pay the tuition fee of for even a communnity college (unless one started it when the kid was born!).

[Guest b2kates]

Generally, if a child's tuition is paid for by the parent's employer, that is considered income to the parent.

There is a NJ case where the tax court determined that for college payments, it could be determined to be a parental obligation and income to the parent.

Tuition reimbursement programs are for employees.

Only way that I have seen it work validly, is when the child is a bona fide employee.