Tax break for graduate education restored, but hurdles remain

The U.S. Senate approved an education bill (H.R. 2646) April 23 that would extend the Section 127 tax exclusion for employer-paid educational assistance for undergraduate courses and restore eligibility for graduate courses, which was terminated in 1996. But, the controversial nature of the underlying bill may force Section 127 proponents to seek another legislative vehicle for reinstating coverage for graduate studies, which is their central focus this year.

Section 127 of the Internal Revenue Code allows employers to provide educational assistance to their employees without having to include the value of the assistance as part of the employees' gross income. The annual limit on …