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muskratsam

Tax Change Impact - Tuition Waivers Taxed!

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Some people are saying that was just passed isn’t the one that screws higher education. I’m confused?

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The senate bill passed. The passed version didn’t touch the education credit and still has tax free tuition waivers for grad students.  Now both the senate and the house have to agree on an identical bill.    Hopefully in the end the senate education provisions will stay.  The senate bill relies on the individual mandate  for health insurance to be repealed and a different tax bracket structure to afford to keep the education benefits.  As a prospective graduate student, I am hoping universities will fund me with scholarships to cover tuition.  For what I understand if universities don’t fund every admitted student and make the scholarship independent of being a RA/TA then a tuition scholarship would be tax free.  If a university funds all of its PhD students why not make tuition cheap/free and then waive it. I hope universities can come up with a solution because I think they have options if tuition waivers become taxable.  

If  you want an easy way to contact your representatives you can use the countable app on a smartphone. Through the app you can message, call, or video message your representatives.  Here is a form letter that I wrote that you can easily customize.

As a potential graduate student, I am concerned that the final tax reform bill will include a provision that would make tuition waivers for employees of universities taxable.  In most cases receiving a funding package for graduate school  that includes a stipend for work and a tuition waiver is competitive.  Students never receive the tuition waiver money in their bank accounts.  Graduate stipends are small and most of them are at or under $30,000.  I have been running the numbers on what taxable tuition would mean for me (insert).  Graduate education increases the earning potential of individuals and education incentives encourage higher education which in the end raises government revenue through higher incomes.  This provision only increases revenue by 65 million over 10 years according to the house committee’s estimate.  But this provision would discourage graduate education which will have negative effects on our future as a nation.  I believe this provision would especially impact our nations competitiveness in STEM.  America needs more STEM graduates and I believe this provision would lower the STEM workforce. I do not think the small increase in revenue is worth the cost to our great country.   I urge you to fight for tax-free tuition waivers in the final bill. 

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I'm sorry , but I believe I don't understand what you're saying. As far as I''m aware, the republican version of the bill has passed. That is the version that altered section 117(d) in order to tax tuition waivers for graduate students. Why are you saying that the passed version still has free tuition waivers for graduate students?

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13 minutes ago, milogoestogradschool said:

I'm sorry , but I believe I don't understand what you're saying. As far as I''m aware, the republican version of the bill has passed. That is the version that altered section 117(d) in order to tax tuition waivers for graduate students. Why are you saying that the passed version still has free tuition waivers for graduate students?

Because the house and senate passed different versions. The house removed the exemption, the senate did not. 

Now the bills have to be reconciled,mans no one is sure what direction that will go in. 

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2 hours ago, milogoestogradschool said:

I see. What is the time frame on the reconciliation process?

As soon as they agree and they will probably want it done before the holidays.

 

2 hours ago, ExponentialDecay said:

Did they remove federal debt forgiveness in both bills?

 I am going to guess you are talking about student loans.   EDIT: The tax bills don’t touch that program but a house bill reauthorizing the Higher Education Act does.   The senate bill still allows deductions on student loan interest.  The American Council on Education has a post here on the senate bill. The house bill cuts deductions on student loan interest.  IMO, the senate bill is better for education.  But in order to keep the education credits and pass with a simple majority the final bill probably needs the individual mandate repealed (saves government money on subsidies) and the senate tax brackets. I think the house is going to be ok with the individual mandate repeal but I am not so sure they will like the brackets.  Both bills are really close to the limit of the deficit increase then can have to pass with a simple majority which is my main concern.     Taxing tuition waivers isn’t a substantial revenue source but it may be “necessary” for the other parts of the bill. 

More and more news articles are being published about the differences in the progress. I don’t want to link anything because things are going to probably change.  But you can probably find something from one of your favorite organizations easily.  

 

Edit: Typos, removed incorrect statement abo

Edited by BrittanyA1701

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@BrittanyA1701 I saw this http://www.dailyrepublic.com/california-us-world/gop-higher-ed-plan-would-end-student-loan-forgiveness-in-repayment-program-overhaul-federal-financial-aid/

which says this:

House Republicans are also envisioning the end of loan forgiveness for college graduates who pursue careers in the public sector. The plan, much like the White House budget, would do away with Public Service Loan Forgiveness, a program that wipes away federal student debt for people in the public sector after they have made 10 years’ worth of payments.

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They hope to get a bill signed into law before Christmas.  A "holiday gift for America" per the current White House occupant.  It is correct that the version that passed the Senate does not have the tuition waiver taxation in it, and I think it also retains the Lifetime Learning Credit.  They will start work on reconciliation with the bill the house passed this weekend, I think.  No telling how long it will take or what form the final bill will take.  Sometimes the House just decides to accept the Senate's version of the bill rather than try to hammer out a bill that they can agree on in both houses.  So that could happen here.  It is still a huge wealth transfer from the middle class to corporations and the 1% ($12.9 billion flowing from one to another by 2027), so either way it will likely hit almost all of us.  But the immediate decimation of graduate education MIGHT be avoided. 

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11 minutes ago, muskratsam said:

 It is still a huge wealth transfer from the middle class to corporations and the 1% ($12.9 billion flowing from one to another by 2027), so either way it will likely hit almost all of us. 

This kind of statement is part of the reason why Republicans are successful at maintaining party unity when it comes to tax cuts. It's not "a transfer of wealth" if a corporation gets to keep its own money.

A different (better) argument is needed.

 

Edited by Sigaba
Typo

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It is $12.9 Billion that aren't paid directly in federal taxes today by individuals in the middle class.  They will be paying more in taxes, and corporate entities and the top 1% of individuals will be paying less in federal taxes.  So call it what you will.  

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@ExponentialDecay, it appears that the removal of student loan forgiveness is legislation that was introduced in the House yesterday while the Senate was debating tax reform. So, as far as I can tell it is in neither the House nor the Senate version of the tax bill, but rather is a separate piece of legislation.

Barring any changes to this that may have been involved in yesterday's amendments (I'm not aware of any, but I don't know for sure), this is a helpful breakdown of the Senate and House tax bills as it impacts higher education: https://www.insidehighered.com/news/2017/11/30/how-senate-and-house-tax-bills-would-hit-higher-education Of course the differences between these bills will have to be reconciled somehow.

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Here is another calculator that shows state tax impact of the proposed House bill.  Although it doesn't consider university provided health care taxable.  

www.tinyurl.com/GradTaxCalc 

 

Edited by muskratsam
fixed url

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1 hour ago, ExponentialDecay said:

My apologies, and thanks for pointing it.  I wasn’t aware of the new bill.   The actual tax bill doesn’t include this but instead a new unpassed bill.   At least it isn’t finalized yet.  

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I think the concern is that any wholesale reclassification could be challenged by the IRS as tax avoidance.

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12 hours ago, muskratsam said:

Here is a calculator some grad students put together.  If you dig into the details and links in the calculator, it is pretty useful to see the possible impact.  

https://docs.google.com/spreadsheets/d/1qmh7E0y9B8xDfHP2ovxSHhnUVFVYwoO9OK33iHShtCo/edit#gid=0  

One thing I wasn't aware of before is that depending on how your university provides health insurance, your taxes apparently could go up on that as well.  If some or all of the cost is considered part & parcel of your tuition waiver, you aren't current taxed on that extra cost.  But if it is outside that, I guess we already pay tax (I'm a first year, haven't seen a W-2 yet, so am not certain).  So that could be another tax increase for some students.  MIT is the example where there would be an increase for the health insurance.

No one really knows what is in the bill that they are voting on at this moment.  I haven't heard that the tuition waiver tax made it into the Senate version, but can't be sure.  And reconciliation could still add it in. :(

 

I read that it was not included in the Senate version. However, that doesn't mean it's not in the clear (nothing is for sure until Trump signs it.) 

https://www.chronicle.com/article/Passage-of-Senate-Tax-Reform/241962

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The Senate version may not be the final version.  The two versions have to be reconciled, and of course the House members still want their changes (the t,ax waiver and elimination of the Lifetime Learning credit) to prevail.  They MIGHT just accept the Senate version as is, though -- happens sometimes.  Then both chambers (house and senate) vote again, and the president signs it.

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5 hours ago, BrittanyA1701 said:

As a potential graduate student, I am concerned that the final tax reform bill will include a provision that would make tuition waivers for employees of universities taxable.  In most cases receiving a funding package for graduate school  that includes a stipend for work and a tuition waiver is competitive.  Students never receive the tuition waiver money in their bank accounts.  Graduate stipends are small and most of them are at or under $30,000.  I have been running the numbers on what taxable tuition would mean for me (insert).  Graduate education increases the earning potential of individuals and education incentives encourage higher education which in the end raises government revenue through higher incomes.  This provision only increases revenue by 65 million over 10 years according to the house committee’s estimate.  But this provision would discourage graduate education which will have negative effects on our future as a nation.  I believe this provision would especially impact our nations competitiveness in STEM.  America needs more STEM graduates and I believe this provision would lower the STEM workforce. I do not think the small increase in revenue is worth the cost to our great country.   I urge you to fight for tax-free tuition waivers in the final bill. 

 

This needs a little bit of working on (e.g. a lot of commas missing), but it's awesome. Thanks!

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Here's an informative Grad School Dean email from a university summing up nicely what's going on and how at least this university appears to be fighting the most egregious of the proposed measures (such as the taxation of grad student tuition wavers): https://www.reddit.com/r/GradSchool/comments/7h53vy/dean_email_regarding_tax_bill/

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Okay so this thread clarified everything for me. All we can do is wait and hope the Senate's version is the one that will pass. I contacted my representatives and really need this to take longer than a week. 

The Forbes article takes a pragmatic approach that I'm not sure schools will take. Changing tuition waivers' names to scholarships is easy enough but don't scholarships require actual transferral of money? Someone educate me here, I think the author may be being a little too practical.

Prayer circle even though I'm agnostic

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2 hours ago, Carly Rae Jepsen said:

The Forbes article takes a pragmatic approach that I'm not sure schools will take. Changing tuition waivers' names to scholarships is easy enough but don't scholarships require actual transferral of money? Someone educate me here, I think the author may be being a little too practical.

Prayer circle even though I'm agnostic

My old PhD school basically told its students that it will try to take this approach. Knowing how they work, I think it would be possible. Although I am "safe" from these changes (it doesn't look like either bill will have the taxes retroactive to Jan 1 2017 ), I do hope my old school is right. That said, no one should count on any sort of arrangements protecting them until they see it in writing!

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Some updates: The goal is to have a bill passed by Dec. 18 now.  I wanted to add a new easy way to contact reps,  just enter your email and address and it will email all 3 for you, and tell you some good news.  A letter about removing the waiver tax is gaining support among congressmen.  Glad my rep is on the letter (maybe someone read my 10 emails to him).  

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17 hours ago, BrittanyA1701 said:

Some updates: The goal is to have a bill passed by Dec. 18 now.  I wanted to add a new easy way to contact reps,  just enter your email and address and it will email all 3 for you, and tell you some good news.  A letter about removing the waiver tax is gaining support among congressmen.  Glad my rep is on the letter (maybe someone read my 10 emails to him).  

Because of mid-term elections coming up in 2018, Republicans are scrambling to get anything to pass at this point.  Personally, I believe this will not make it into the final draft.  

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Btw, if your campus has a union it's a good time to support it. My union is going into contract negotiations and one of the demands is that the university offset any financial hardship caused by tax bills targeting higher education. Obviously it's a great idea to contact your senators and try to get a better bill passed, but it's also good to do what you can to try to mitigate the damage if that doesn't happen.

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