Should college tuition waiver be taxed?

10 Dec

New proposed GOP tax plan, the Tax Cuts and Jobs Act is not a law yet. It passed the House and Senate. The House bill is different from the Senate version. So the next step for the US Congress is to make a unified bill from both House and Senate. I don’t want to make comments by anticipating a disaster when it has not even become a law. But you need to know that the House bill, not Senate version is pushing taxing on:

  • Tuition waiver from a college, and
  • Tuition assistance from an employer

College tuition waiver is typically given to graduate students who does research or teaching assistant for a professor. They are called RA (Research Assistant) or TA (Teaching Assistant). Many grad students benefit from tuition waiver and stipend to sustain their lives in exchange of being RA or TA. The truth is the tuition waiver helps grad students financially and academically but also college saves money by letting students work for research or class, instead of hiring a fully educated researcher, instructor, or professor. I received college tuition waiver and stipend when I was a grad student. I am thankful for the funding because I did not have to borrow money to go to school.

Currently college tuition waiver is not taxed.

Some people get tuition paid by an employer because many company see investing in employees for their education is a good idea. I took a couple of classes from college while I was working and my company paid for them. Only requirement from my employer was that I had to take courses related to my work and pass these classes. FedEx and Starbucks, for example have a college tuition assistance program for their employees. It is a win/win for employee and employer.

Currently college tuition assistance program from an employer is not taxed.

BUT, if the new House version of tax reform bill passes, tuition waiver and tuition assistance program are both taxable INCOME. Income? Do you think tuition waiver or tuition assistance should be defines as Income?

Public grad school tuition is about $10,000 per year; private school is up to around $60,000 annually. So depending on the amount of college tuition waiver and a student income, he might end up paying $1,000 to $6,000 per year for the tax.

Why do some policy makers think taxing tuition waiver is a good idea? Do they think milking college students from tuition waiver is a way to give a lower tax rate to corporations? If you currently receive college tuition waiver, are you able to pay tax on it and continue your study? I like to hear your opinion.

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