Singleton Bill to Allow Gross Income Tax Deduction for Educational Assistance Programs Advances

TRENTON – Legislation sponsored by Senator Troy Singleton that would allow gross income tax deduction for certain educational assistance programs was passed by the Senate Higher Education Committee yesterday.

“As more college students graduate with student loan debt each year, this burden is increasingly becoming a strain on our economy,” said Singleton (D-Burlington). “This proposal encourages employers to be a part of the solution to this issue by allowing them to offer a tax-free-employee benefit to help those graduates, who are their employees pay down that debt. Adding this type of tax relief could become a valuable financial benefit to any company’s benefit structure and directly impact the quality of life for their employees.”

The bill, S-1922, allows a gross income tax deduction for employees for amounts paid by employers for certain educational assistance programs for employees and for employee’s student loans. Making these forms of employer-provided assistance tax free under the New Jersey gross income tax can incentivize employers and employees to establish programs that provide a personal “financial wellness” benefit to employees without actually raising taxable salaries and wages. These forms of tax-free assistance can aid employees in meeting their current costs of pursuing their higher education goals while they hold a job, and can also help address high student debt burdens facing the college-educated workforce.

This bill would allow a gross income deduction for employees will be limited to the $5,250 annual limit under the federal income tax exclusion. Tax-free educational assistance provided by an employer includes payments for tuition, fees, textbooks, and equipment. To qualify, the courses do not need to be work-related or be part of a degree program but cannot involve sports, games, or hobbies. The educational assistance program must be set out in a written plan offered by the employer. Payments for educational assistance compensate the employee for costs of certain coursework undertaken by the employee while employed by the employer, as opposed to student loan debt that the employee had already accrued.

The bill was released from committee by a vote of 5-0, and next heads to the Senate Budget and Appropriations Committee for further consideration.