General Question

guitarhero1983's avatar

Do businesses benefit from providing tuition reimbursement to their employees, and if so, to what degree?

Asked by guitarhero1983 (135points) August 25th, 2010

I am a current employee and am considering ‘pitching’ (requesting) tuition reimbursement for a certificate program that is directly pertinent to my current job. I was hesitant in pitching it initially because I didn’t want to make waves, but now I am curious if it would actually benefit the company tax-wise to such an extent that I should mention it to them. If it does benefit them tax-wise, is there a way to determine how much, specifically?

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9 Answers

Cruiser's avatar

IMHO if they wanted to reimburse you for tuition it would have been offered as an option at the time of your employment. From what I do know, your compensation reflects what they think you are worth including your prior education achievements. If they were to extend tuition reimbursement, your salary IMO would reflect that additional cost burden by a smaller percentage paycheck. A few years back a company may have been able to absorb a tuition expense as an incentive to keep good employees and on that same thought line a higher educated employee generally costs the company a higher salary. Again that would have been considered based on your level of education at the time of employment. Today with 10% of our work for unemployed and another 10+% underemployed there are a lot of eager bodies who would love a decent paycheck.

My advice walk softly and see what you can find out about tuition allowances first before making a grand announcement about more ways to cost your company more money.

wgallios's avatar

There might be a tax benefit for the company, and may make more sense for them to give you that money. I would check with an accountant, but I’m more than sure it can be put on the books as a business expense. Which if it can, and the business is profitable, thats great for them, and for you. If that gave you $5000 in tuition reimbursement that’s $5000 they wont have to pay in taxes at the end of the year.

I always try to run my company at a loss on the books each year, that why if I can show I came up -$5000 for the year, thats $5000 the company gets back, even though I may have spent that money on all kinds of stuff like office supplies, software, rent, utilities etc.

marinelife's avatar

The main benefit that you can pitch is making you a better employee. Say that you are willing to sign a contract to stay for an agreed-upon amount of time so they get the benefit of your education.

bob_'s avatar

I wouldn’t mention it to them, but do ask if they’d support you in furthering your education. Don’t think of selling as “get $100-worth for $70”, but rather, explain how you would benefit, and how then you’d be a more productive employee.

guitarhero1983's avatar

Thanks, everyone. Does anyone have any idea how to determine how much they could deduct (i.e., any accountants in the house?)?

Dr_Lawrence's avatar

There are two benefits that come to mind: 1) retaining skilled employees is less costly than training new ones; 2) supporting continuing education improves employee skills and flexibility in the workplace.

BarnacleBill's avatar

The IRS has strict guidelines for deducting educational expenses, so be sure to read Publication 970, “Business Deductions for Work-Related Education,” thoroughly. Generally, employers can deduct employee educational expenses if the courses maintain or improve job-related skills, or if employees need the education to continue in their current jobs. If you are self-employed, you can also write off some educational expenses. Transportation to and from the classes may be deductible. You can’t write off any educational expenses that train you in a new field.

I would make the pitch that from a business perspective, in a tight economy, an educational perk is a great way to retain employees without incurring salary expenses, and it gets a business tax break to boot.

Simone_De_Beauvoir's avatar

I think you should go for it.

iamthemob's avatar

The main issue will be to design the benefit so that it qualified under the tax code. Therefore, there may also be some up-front legal and accounting fees to draft the policy or review a payment structure to ensure it was compliant. If it is a working condition fringe (Work-Related Education as @BarnacleBill outlines above), then the dollar value of the education is excluded (i.e., it’s tax-free) from income, so there shouldn’t be any real withholding requirements on the employer’s end. The benefits of the program, though, are more intangible, and have been generally outlined above: significantly, (1) education increases “human capital” (i.e., employee skills); (2) generally increases employee loyalty, which reduces attrition rates and retraining costs; and (3) is a significant recruiting tool to attract talent away from competitors without such benefits.

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