Graduate Courses Taxable

[dh003i]

I'm receiving tuition benefits for coures at the University of Rochester. The tuition benefits form says that the value of the course received as a benefit may be taxable, if the course is a graduate level course. The courses I'm taking are graduate level courses. Under what circumstances are they taxed?

[Guest anonymous coward]

Here where I found Sec. 127 of the Code:

http://www4.law.cornell.edu/uscode/26/127.html

IANAL, nor a professional in this regard, but it looks like anything below $5,250 is excludable from taxable income. But remember, the excludable amounts can't be used for "tuition deduction," or "lifetime learning" or anything like that.

What I don't see in this though, is any distinguishment b/t undergrad/grad level...

[Theresa Lynn]

The forms may be worded that way because they were not updated when the rules on graduate level courses were changed in 2001

This is from RIA Checkpoint's Benefits Analysis:

Educational assistance whose value may be excluded from employee income (see ¶119,210) includes:

(1) the employer's payment of educational expenses incurred by or on behalf of an employee, including, but not limited to, tuition, fees, books, supplies, and equipment; 18 and

(2) the employer's provision of courses of instruction for an employee, including books, supplies, and equipment. 19

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18

Code Sec. 127©(1)(A).

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19

Code Sec. 127©(1)(B).

Excludable educational assistance does not include tools or supplies (other than textbooks) that the employee may retain after the course of instruction ends, or meals, lodging, or transportation. 20

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20

Code Sec. 127©(1); Reg § 1.127-2©(3).

Education for this purpose means any form of instruction or training that improves or develops an individual's capabilities, whether or not job- related or part of a degree program. Education may be furnished directly by the employer (alone or in conjunction with other employers) or through a third party such as an educational institution. 21

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21

Reg § 1.127-2©(4).

Education involving sports, games, or hobbies does not qualify for exclusion 22 unless it involves the business of the employer or is required as part of a degree program. Education that instructs employees how to maintain and improve health may qualify for exclusion so long as it does not involve the use of athletic facilities or equipment and is not recreational in nature. 23 Although excludable educational assistance did not include graduate level courses begun after June 30, 1996, that lead to a law, medical, business, or other advanced academic or professional degree, 24 the exclusion (up to the dollar limitation; see ¶112,212) for educational assistance for graduate level courses is restored for courses begun after December 31, 2001, 24.1 and before January 1, 2011. 24.2

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22

Code Sec. 127©(1).

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23

Code Sec. 127©(1); Reg § 1.127-2©(3).

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24

Code Sec. 127©(1) after amend by Sec. 1202(b), PL 104-188, 8/20/1996 ; Sec. 1202©(2), PL 104-188, .

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24.1

Code Sec. 127(b)(1), as amend by Sec. 411(a), PL 107-17, 6/7/2001 .

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24.2

Sec. 901(a), PL 107-16, 6/7/2001 .