The 10 Best and the Worst States for Employee Dependent Scholarships

You’ll need to weigh the advantages and disadvantages of working for yourself against working for others. One of the biggest questions you’ll need to ask yourself is whether or not it makes sense for you to take on a dependent. If you’re thinking about working for others, you should also think about whether or not you’d be able to support your future employee financially. 

If you’re considering a dependent scholarship to help support your future employee, you might wonder which states offer the best tax benefits for dependent scholarships. Or you might be concerned about the legal implications of your dependent scholarship plan. 

You’ll want to know about your dependent scholarship’s tax laws, tax benefits, and other legal aspects. In this post, we’ll answer these questions by discussing the best and worst states for dependent scholarships.

What Is a Dependent Scholarship?

A dependent scholarship is a type of scholarship that you give your employee as partial compensation for their dependents. This could be your child, spouse, or another dependent. Whatever the case, you’ll want to make sure you have the legal right to offer a dependent scholarship and that it complies with the rules of tax, employment, and other laws. You’re providing your employee with some of their taxable income. This is a popular way for businesses to help employees cover the cost of supporting their dependents.

The Best States for Dependent Scholarships

Dependent scholarship tax benefits are generally more favorable in the following states:

• Alaska – Dependent scholarships are tax-free in Alaska. You’ll only have to pay income tax on the portion of your employee’s scholarship.
• New Hampshire – New Hampshire offers a resident tuition waiver in addition to the tax benefits. This means that your employee won’t have to pay taxes on their scholarship when they use it to pay for college. 
• Nevada – The state of Nevada allows you to provide dependent scholarships to your employees’ spouses or children. This is one of the few states where you can do so without legal issues.
• Oregon – Oregon is unique in that you can provide a dependent scholarship to your employee’s spouse or child without paying taxes on the scholarship. 
• Vermont – Like New Hampshire, Vermont allows you to give a resident tuition waiver for your employee’s scholarship.

The Worst States for Dependent Scholarships

• On the other hand, you’ll want to avoid the following states: – Iowa – Iowa taxes you on 100% of the number of dependent scholarships you provide your employee. That’s not a tax break; that’s a tax. 
• New York – New York taxes any amount of income you receive as a dependent scholarship. That can make your dependent scholarship plan less attractive. 
• Ohio – Ohio taxes dependent scholarships as regular income. That means you’ll have to pay more in taxes on your employee’s scholarship. 

Wisconsin – Like New York, Wisconsin taxes any income your employee receives as a dependent scholarship. This can make your employer-sponsored scholarship plan less attractive.

Conclusion

Whether you’re setting up a dependent scholarship plan or considering one, you’ll want to make it legal and tax-free. Fortunately, the best states for dependent scholarships also happen to be some of the friendliest conditions for tax deductions and tax-free benefits.

If you’re looking for the best place to take advantage of tax-free dependent scholarships, you’ll want to start with the list above.

If you’re already working in one of the best states for tax-free dependent scholarships, great! Now you can start spreading the word to other employers to increase the overall benefit to your local economy.

If you’re not in one of the best states for tax-free dependent scholarships, you can take steps to improve their tax benefit. Ask a tax attorney to review your business’s tax returns and tax returns to make sure there are no mistakes. And finally, look into moving your business to one of the best states for tax-free dependent scholarships.