When President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 late last year, preservation of current tax rates and a one-year Social Security tax cut got all the headlines. But tucked into the broad statute were several provisions affecting.
Tuition reimbursement: The new law extended tax breaks for employer-paid tuition reimbursement. Employees can continue to receive up to $5,250 tax-free from an employer plan to pay for qualified higher-education expenses, including graduate school tuition.
This tax exclusion was scheduled to expire after 2010. Now it’s extended through 2012.
Commuter benefits: The law extended tax-free commuting benefits designed to encourage employees to use mass transit to get to work. The maximum benefit for monthly transit passes was recently increased from $120 to $230 for the 2010 tax year, and the new law preserves that amount through the end of 2011.
The same benefit can also pay for van pooling and employer-provided parking.
On-site child care: The new law extends a 25% tax credit employers may take for qualified expenses (up to $100,000 per year) related to providing child care facilities to employees. An extra 10% credit is allowed for child care resource and referral services. The tax credit applies through the 2012 tax year.
Note on Social Security taxes: The law lowered employees’ share of Social Security withholding to 4.2% (from 6.2%) for 2011. Because the new law was enacted so late in 2010—on Dec. 17—it may take a couple ofcycles for the new withholding rate to show up in paychecks. Check with your or accounting staff to find out when the change will be fully implemented.