Exemption That Helped Mechanchim Preserved in Tax Deal

A threatened cutoff of a key tax exemption that significantly reduced the tax payments of mechanchim and teachers of yeshivos and seminaries was averted in the final bill announced Thursday by House and Senate negotiators.

Beth Medrash Govoha’s government affairs department had been warning that the version passed previously by the House eliminated a tuition reduction tax exemption for educators, called the Qualified Tuition Benefit. The Senate kept it, and it appears to be remaining in the final deal that will be voted on next week.

Educational institutions typically pay tuition for an employee or that employee’s children at any school, and that tuition payment does not count to their federal taxable income. In addition, this provision also affects tuition waivers given to graduate students, which could have ramifications for kollel yungeleit as well.

If this cut would have gone through, mechanchim and staff receiving free or reduced tuition for their children may have had to pay taxes on those tuition breaks. It would have also required mechanchim to include the tuition exemption as part of their adjusted gross income, making them ineligible for many government benefits.