Child Development Center Tuition-Fee Waiver Not Taxable

By Chester Curtis, Directorate of Prevention, Resilience and ReadinessJune 26, 2024

Children at a CYS facility having fun.
Children at a CYS facility having fun. (Photo Credit: U.S. Army) VIEW ORIGINAL

Child Development Center employees have just had a tax benefit confirmed.

The Armed Forces Tax Council has determined that the Child Development Center tuition-fee waiver for CDC employees is not taxable.

Section 117(d) of the Internal Revenue Code provides that any qualified tuition reduction is excluded from gross income.

The term “qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization that is defined as an “educational organization” that maintains a regular faculty and curriculum and has an enrolled body of students in attendance at the place where its educational activities take place.

As a result, tuition reduction offered to employees of educational organizations or offered to an employee’s dependent child may be excluded from gross income so long as that tuition is for the education of an employee (or the dependent child) for education provided by an “educational organization” as that term is defined in the Internal Revenue Code.

“This is good news for CDC employees who have children enrolled in the CDC,” says Donna Garfield, senior program analyst at Child, Youth and School Services. "The fee waiver for CDC employees is used to bolster the number of qualified applicants and incentivize current CDC staff to remain in their positions.”

CDCs offer direct-care staff tuition-fee waivers, which discount their own child care from 25% to 100% for their eligible dependents receiving child care at the CDC.

Qualified staff are needed to support the largest employer-sponsored child care program in the United States, serving approximately 200,000 children of uniformed service members and DOD Civilians, and employing over 23,000 direct-care staff. DOD’s child development program includes accredited, installation-based, government-run, full-time preschool and school-age care in its CDCs.

Military service members, surviving spouses and DOD Civilians are generally eligible for CDC services. DOD contractors, military retirees and other federal agency personnel are eligible on a space-available basis. (Photo courtesy of Bianca Sowders)