A qualified tuition reduction is tax free. It is a reduction in tuition that meets the following rules.
Separate rules apply to education below the graduate level and education at the graduate level.
Education below the graduate level. A tuition reduction for education below the graduate level is tax free if the reduction is provided by an educational institution to its employees for their education or the education of any person treated as an employee. It must not represent a payment for services. Under this rule, only the following are treated as employees. Child of deceased or divorced parents.