Action to avert 'fiscal cliff' affects U-M, employees and students
The recent action this week by Congress to address the "fiscal cliff" has some positive news for universities.
While most of the focus on the legislation has been with the provision that permanently extends income tax rates for most individuals and families, other provisions will affect U-M as an institution, and its employees and students.
Those provisions include:
• Section 127 — Employer Provided Education Assistance is permanently extended. This provision allows an employee to exclude from gross income up to $5,250 of employer-provided education assistance.
• Student loan interest deductions and the exclusion from income of amounts received under certain scholarship programs are permanently extended.
• The American Opportunity Tax Credit is extended through 2017.
• Above-the-line deductions for qualified tuition-related expenses are extended until the end of 2013. Such deductions are available to taxpayers regardless of whether they claim the standard deduction or itemize when filing their federal income tax return.
• Rollovers for tax-free distributions from individual retirement plans for charitable purposes have been extended for two years. This provision expired at the end of 2011, so the new legislation contains a transition rule under which an individual can make a rollover during January 2013 and it will be counted as a 2012 rollover.
• Tax credits for research and experimentation expenses have been extended through 2013.
• Medicare physician payment rates, which were scheduled to be reduced, instead will instead be frozen through Dec. 31.
• The payroll tax holiday expires for all employees.
• Mandatory spending cuts (also known as "sequestration") are delayed for two months to allow for further negotiations. Those cuts potentially could affect research grants, some education funding, and some aspects of the health system as Congress looks for savings.
The hard work continues though, with the federal debt ceiling expected to expire at the end of February, just as the next sequestration deadline looms. Appropriations for fiscal year 2013 are only in place through late March, so Congress will need to address that funding as well.
The 113th Congress, which will be sworn in today, is expected to haggle over these contentious issues for the next two months.
For more information, please contact U-M's Washington, D.C., office at 202-554-0578.