Reimbursements up to $5,250

• Employers can give their employees up to $5,250 of tax-free reimbursement for graduate or undergraduate courses each year, as of 2011. Employees must use that money for tuition, fees, textbooks, and other supplies that they will not keep after the course is completed, though students are allowed to keep their textbooks. If you pay tuition above your employer's reimbursement, you must first subtract the reimbursement before you can claim a credit or deduction for tuition paid out of pocket.
  
  

Reimbursements over $5,250

• Employees must pay taxes on reimbursements over $5,250 in most cases. Employees may be able to avoid taxes even on reimbursements over $5,250 if they could have deducted the education costs as a business expense. For example, if an employer has already given you $5,250 to get a master of science degree in social work, but in that same year institutes a new requirement that all employees be certified in computers, your tuition reimbursement for the computer certification would also be tax free.
  
  

Limits

• Employees can have a total of $5,250 of tax-free tuition reimbursement each year among all employers. Thus, an employee who works for two or more employers in a given year cannot get a $5,250 tuition reimbursement from each of them. Further, employers can withhold the reimbursement if their employees do not do satisfactorily in the course.
  
  

Limitations

• You do not have to pay taxes on your employer reimbursement even if you are not intending to attain your graduate degree. The reimbursement can be applied to a few courses that you are taking in order to better your skills, or to a certification program. The IRS also allows universities and colleges to give tuition wavers to its employees.