When applying for tuition remission, it is important to understand the tax implications. Taxable tuition remission may affect the paycheck of the employee. Please see the Tuition Tax Chart .
Courses taken by the Employee/Retiree:
- Undergraduate tuition remission is non-taxable to the employee/retiree.
- Graduate tuition remission is usually taxable. Tuition waived above the IRS limit of $5,250 in a calendar year is subject to the tax rates below.
Courses taken by eligible spouse/dependents:
- Undergraduate: To be considered non-taxable, the employee/retiree must claim the student as a dependent on their federal tax return for the year in which tuition remission is granted. Please review the tuition tax chart.
- Graduate: The full amount of tuition remitted is taxable to the employee. Taxes will be withheld from the employees paycheck at the tax rates below. Retirees will be mailed a 1099 for tuition waived. Please note, only employees hired prior to 1990 are eligible for graduate tuition remission for a dependent, please see the eligibility section and policy for details.
Tax Rates
If Tuition Remission is determined to be taxable to the employee, taxes will be withheld over 5 paychecks (4 paychecks in the summer). The employee will be notified by Human Resources of the taxable amount of the tuition waived each semester. Employees paychecks are not deducted for the amount of tuition, rather they are deducted for only the taxes on the amount of taxable tuition waived. Employees can check their billing statement to monitor the amount of tuition waived each semester. Tuition Taxes will be withheld at the following rates:
Federal 25%
State/Local 7-8%
FICA (Social Security & Medicare) 7.65%