Discussion:Tuition Reduction

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Discussion Forum Index --> Advanced Tax Questions --> Tuition Reduction
Discussion Forum Index --> Tax Questions --> Tuition Reduction

Taocpa (talk|edits) said:

5 April 2008

This is my first exposure to this issue. Client is professor and child attends his university. According to Pubs 15-B and 970, client fits the general description that they don't report the tuition reduction as income. But as usual, someone at the school told client something else. The only thing I saw was the transcript reduced the tuition by the benefit on the 1098-T.

Anyway, the tuition reduction per Sec. 117. Qualified scholarships reads:

    (d) Qualified tuition reduction

        (1) In general

             Gross income shall not include any qualified tuition reduction.

        (2) Qualified tuition reduction

        For purposes of this subsection, the term qualified tuition
        reduction means the amount of any reduction in tuition provided
        to an employee of an organization described in section
        170(b)(1)(A)(ii) for the education (below the graduate level) at
        such organization (or another organization described in section
        170(b)(1)(A)(ii)) of -

So, I guess my client:

A) has no worries; and

B) ought to listen to me and not the other individual?

Obviously, the 1098-T amount is adjusted down properly, but am I missing anything else?

Tom

Natalie (talk\|edits) said:	April 5, 2008
Is there a wait list for the classes? I'm not sure whether that applies for universities. If it does apply, however, then the tuition is taxable, I'm pretty sure.

Taocpa (talk|edits) said:

5 April 2008

Natalie,

Not to my knowledge. I will have to confirm, but, I didn't see that when I researched this issue that's why I asked.

Tom

Fsteincpa (talk|edits) said:

5 April 2008

K, I hate reading the actual IRS sections. The first part are bad enough, but then the amendments and deletions. Can't they have two areas. One, posted as it is here on the link and then another as it reads with everything incorporated. Yes, I know that it can be found elsewhere, but it would be nice if the actual IRS did that.

K, enough of the rant. I actually had to look up Fellowship grant so Tom, thanks for asking this cause it made me do my work too.

Natalie, why does it not pertain to Universities. Or, are you saying that if there is a wait list, and the employee <or child> is bumped ahead of the wait list, that that is what would make the monies taxable?

Now, I have an additional question about my clients fellowship grant. Although not taxable, is it supposed to be used to offset tuition expenses for purpose if the education credit?

And yes, a kitten died cause I didn't even look at the instruction in regard to this cause client is still in the not yet processed pile.

Jctmstx (talk\|edits) said:	5 April 2008
Not taxable and you have the proper citation. The employees dependent is defined under 132(h).

Taocpa (talk|edits) said:

5 April 2008

Fred/Natalie,

I should specify in my case, child is dependent and an undergraduate. I accidentally forgot that. That's key. Sorry.

I went to these two Publications first and backtracked:

Publication 970

Publication 15-B

Fred, Publication 970 is more relevant I think to your issue. Look there for the answer. That's the best I've seen so far unless someone can specifically answer your question.

Jct, thanks for the confirmation, I went and dug a little further and found some more confirmation, so I am good. I appreciate it.

Tom

Fsteincpa (talk\|edits) said:	5 April 2008
I've got that on my review list. thanks Tom. I haven't opened his return yet. Many different ventures and items in his, but thankfully, he is organized. Looks messy, but his stuff is all orderly. I'll dig into Monday or Tuesday. Figured I'd piggyback yours and see if I couldn't ride the wave.

Natalie (talk|edits) said:

April 5, 2008

Fred, all I said was I wasn't sure the wait list applied to universities. I have a private school for a client. As a benefit, they give children of their employees breaks on tuition (100% of it). As long as there is no wait list for the class, the tuition remission is not taxable. Once the class has a wait list, it becomes taxable to the employee.

Tom asked if there was something else to consider, so that's why I brought it up. I look forward to learning more about this myself.

Fsteincpa (talk|edits) said:

6 April 2008

Ok, that kind of make sense. Wasn't entirely sure what you were talking about, but thought that was it.

So, in private schools, tuition reduction becomes taxable if there is a wait list, which makes sense due to preferential treatment.

Wait list would imply pecking order. Now, I don't know of many Universities with "official" wait lists, they usually have more applicants than admissions, so they just don't accept people. Just speculation of course.