If your employer pays for job-related courses, the payment is tax free to you provided that the courses do not satisfy the employer’s minimum education standards and do not qualify you for a new profession.
Even if not job related, your employer’s payment for courses is tax free up to $5,250 in 2015, provided the assistance is under a qualifying plan that meets nondiscriminatory tests. Both Graduate and undergraduate courses qualify for the exclusion. The exclusion covers tuition, fees, books, equipment, and supplies that you cannot keep at the end of the course. Lodging, meals, and transportation are not covered by the exclusion. Sports or hobby-type courses qualify only if the courses are related to your business or are required as part of a degree program.
Employees and retired employees of educational institutions, their spouses, and their dependent children are not taxed on tuition reductions for undergraduate courses provided the reduction is not payment for teaching or other services. Officers and highly paid employees of the educational institution may claim the exclusion only if the institution’s plan does not discriminate on their behalf. The exclusion applies to tuition for undergraduate education at any educational institution, not only the employer’s school.
Graduate students who are teaching or research assistants at an educational institution are not taxed on tuition reductions for courses at that school if the tuition reduction is in addition to regular pay for the teaching or research. The graduate student exclusion for tuition reductions applies only to teaching and research assistants, and not to faculty or other staff members (or their spouses and dependents) who take graduate courses and also do research for or teach at the school.