By Rhonda Campbell
Tax Benefits Associated with Employee Tuition Assistance Programs
Employee tuition assistance programs are offered by small business owners as well as mid-size and large employers. The programs are generally a part of comprehensive employee benefits and rewards initiatives, aimed at attracting talented workers. Employers also offer employee assistance programs as a way to retain top performing employees.
Another reason that employers offer tuition assistance programs is because they can receive tax deductions for paying workers’ tuition, a step that helps to improve the educational level of the country’s citizens. Generally employees can receive up to $5,250 in tuition assistance before they have to declare the funds when they file their income taxes. However, as with other tax situations, workers are advised to check with their accountants to verify whether or not they must report receiving employer paid tuition assistance on their tax returns, as tax laws change.
Benefits of Paying for Education thru Employee Tuition Assistance Programs
Additionally, employees participating in mandatory job training programs (training programs their employers require them to take) may be eligible to receive larger amounts of funding, above the $5,250, before they have to report the funds on their tax returns. However, benefits employees receive through employee tuition assistance programs extend beyond tax benefits. For example, employees participating in employer tuition assistance programs can also:
- Earn enough college credits to become the first person in their family to graduate from college
- Avoid having to pay back interest-laden student loans
- Focus on work-related subjects, strengthening their job skills
- Get noticed by supervisors and managers and start to be perceived as a “go getter”
- Gain enough postsecondary training to start supervising other employees
- Increase their chances of receiving job promotions and salary increases
- Set an example for colleagues, thereby increasing employee morale in departments where they work
- Encourage their children and other family members to enroll in college and extend their education
- Complete courses that help them pass licensing examinations (e.g. Series 7)
By participating in employee tuition assistance programs workers can save thousands of dollars. They can also become increasingly motivated to earn top grades as employers generally only reimburse tuition if workers earn a 2.0 grade point average (GPA) or higher in college courses they take. When considering the costs of getting postsecondary degrees, reaching out to human resource managers or direct-line supervisors and asking them about enrolling in a company-sponsored tuition assistance program makes good academic, financial and career sense.
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