Coaching pay vs tuition

[whatdoiknow]

Need knowledge. High School allows coaches to apply stipend to child's tuition, without being taxed. Apparently long standing custom. Some coaches are teachers, some are not. Also, all teachers get free tuition for their child in the school. Have been given the direction that this is OK to continue. Seems outdated to me. Does anyone have Regs or reasoning to say anything definitive? Thanks.

[Luis Mopeo]

Correct answer: It's a barter transaction. The coach whose child gets free tuition has taxable income in the amount of the FMV of the tuition.

Practical answer: Don't stir things up.

[Bees Knees]

TTB, page 13-27

No-Additional-Cost Services [IRC §132(b)]
The value of services provided to employees that an employer offers
to customers in the ordinary course of business in which the
employee performs substantial services is excluded from taxable
wages.
These types of services are generally excess capacity services,
such as airline, bus, or train tickets; hotel rooms; or telephone
services provided free or at a reduced price to employees working
in those lines of business.
The service provided to employees cannot be excluded if it causes
the employer to incur substantial additional costs.

I think in your situation, if it doesn't cost the school anything substantially extra to have a coaches kid enroll in classes, it could be considered an excludable fringe benefit. It would depend on facts and circumstances. If you had 30 teachers all putting their kid in school for free, obviously it would cost the school extra money having to offer an extra class to accommodate everyone. Then it might not be an excludable fringe.

[New York Enrolled Agent]

Bees
Rather than §132(b), I think §117(d) - Qualified Tuition Reduction would be a better choice. It provides that gross income does not include a qualified tuiton reduction. The teachers are clearly employees so I think they qualify without a problem. The "outside" coach might be a different story???

[JohnH]

Good discussion

I like this discussion because I've been meaning to post a similar question about church day care employees and church staff members who receive tuition reductions for their own children who attend the church-operated day care center.

[veritas]

Bees
Rather than §132(b), I think §117(d) - Qualified Tuition Reduction would be a better choice. It provides that gross income does not include a qualified tuiton reduction. The teachers are clearly employees so I think they qualify without a problem. The "outside" coach might be a different story???

I would think the coach would receive the same benefit as long as he/she was an employee.

[whatdoiknow]

Thank You!!!

Gentlemen, you are great! Thanks so much with the help. Yes, i would even say, you are the bees knees!