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Tax Break for Employer-provided Educational Assistance Extended

December 14, 1999
Related Topics: Finance/Taxes, Featured Article
Issue: Several clerical employees have beenparticipating in your company-sponsored plan to upgrade their skills by takingundergraduate courses. Employees are making plans to set up coursework for nextyear. However, you know the tax-free status of educational assistance was setto expire next summer. What should you tell employees?

Answer: The tax-free treatment of benefitsprovided under educational assistance programs will be extended for 18 monthsunder a bill just passed by Congress and sent to the President.

An educationalassistance program is an employer-sponsored plan under which the employer paysfor the educational expenses of its employees. Under current law, employers mayprovide employees with tax-free educational assistance of up to $5,250 per yearin order to attend undergraduate courses that begin before June 1, 2000.

The employer automaticallytreats the educational assistance as a tax-free benefit and does not include itas wages on the employee's W-2 Form.

If the bill is signedinto law, as expected, the exclusion from gross income for benefits providedunder employer educational assistance programs would be extended through December 31, 2001. As undercurrent law, the exclusion would apply to undergraduate courses only.

Cite: H.R. 1180, the Ticketto Work and Work Incentives Act of 1999.

Source: CCH Incorporated is aleading provider of information and software for human resources, legal,accounting, health-care and small-business professionals. CCH offers humanresource management, payroll, employment, benefits, and worker-safety productsand publications in print, CD, online and via the Internet. For moreinformation and other updates on the latest HR news, check our Web site at

The information contained inthis article is intended to provide useful information on the topic covered,but should not be construed as legal advice or a legal opinion.

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