A parent/business owners child may be eligible to participate in an IRC Section 127 employer education assistance plan. To qualify the child must: 1.Be at least age 21 2.Be a legitimate employee of the business 3.Not own more than 5% of the business 4.Not be a tax dependent of the parent/owner
The parents reduced their taxable income by $5,000 by having their child participate in an IRC Section 127 employer education assistance plan. Since the parents income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by having your child participate in an employer education assistance plan.