Lawmakers OK education benefit, mass transit tax break increase
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The tax-favored status of educational assistance benefits will continue, while a tax break for mass transit expenses will jump under tax legislation federal lawmakers approved Tuesday.
Under Section 127 of the Tax Code, employers can reimburse employees for up to $5,250 in annual undergraduate and graduate educational costs without the reimbursement being added to employees' taxable income.
That tax break expired on Dec. 31. But under a provision in the American Taxpayer Relief Act approved Jan. 1, lawmakers retroactively restored Section 127 and made the tax break permanent.
In addition, lawmakers boosted through Dec. 31, 2013, the maximum pretax contribution employees can make to pay for mass transit expenses to $240 a month from $125.
The increase is retroactive to Jan. 1, 2012, but as a practical matter — due to administrative complications — the overwhelming majority of employers will implement the higher contribution limit for 2013 only, experts say.
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Senate panel approves bill to increase mass transit contribution tax break
WASHINGTON—Employees would be able to make up to $240 a month in pretax contributions to pay for mass transit expenses through the end of 2013 as part of tax legislation approved last week by the Senate Finance Committee.
