The new tax law introduced by the House Republicans could have a negative impact on universities, graduate students and individuals with student loans.
The way the current law works, the graduate student receives tuition waivers in exchange for teaching classes or doing research. The money is paid directly from the university on behalf of the graduate student by the university and is not counted as income or subject to income tax on the students annual tax returns.
Under the new bill, the money that is paid for tuition for the benefit of the graduate student would be counted as income and subject to income taxes on the student’s tax return. Basically, the student would be paying taxes on money they never receive.
As these students work towards Ph. D’s or towards their graduate degree the university typically pays them a stipend in exchange for their work in research and as a teaching assistant. This stipend is treated as taxable income currently and in the new House tax bill.
There are many schools speaking out on this as they are concerned about how this House bill will impact students and faculty. Making higher education more costly for students may reduce the long term benefits of investing in graduate students.
There is also talk of eliminating the student loan interest deduction. Currently individuals making less than $80,000 and paying back student loans are able to deduct up to $2,500 of student loan interest paid.
Another benefit in jeopardy of being taken away from students and their employers is tax free education assistance. In the new proposal, if an employer pays for an employee’s education directly to the university or otherwise, the student will be required to pick this amount up as taxable income.
At this point we shall wait and see how it plays out.
Jill Treeful, CPA
TREEFUL DAMASO ANICETO, INC.