Tax Considerations for Tuition Support for Full-time and Part-time Employees for Undergraduate and Graduate Studies
Overview - Tuition support is primarily provided for employees under University benefit programs. In addition, there are occasions when a private gift or endowed scholarship is awarded through financial aid to an employee or departments provide tuition support for employees. Tuition provided under a benefit program or through a private gift or endowed scholarship fund awarded through financial aid generally qualifies for IRS tax exemptions. However, tuition provided by departments does not qualify for IRS tax exemptions and is fully taxable to the employee - see below.
University benefit programs - amounts paid under these programs are subject to the Hopkins plan limits and generally qualify for IRS tax exemptions:
- Tuition Remission - pays for full-time JHU faculty and staff, and their spouses
and qualified dependent children for tuition remission for part-time undergraduate and
graduate studies through the University's schools.
a. Tuition remission for graduate courses taken by a spouse and qualified pendents are taxable to the employee. b. Tuition remission for undergraduate and graduate courses taken by a domestic partner and related dependents are generally taxable to the employee.
- Tuition Grant - pays for full-time undergraduate studies of qualified dependent
children of full-time benefits eligible faculty and staff at qualifying institutions
of higher education.
a. Tuition grants for qualified dependents are tax-free. b. Tuition grant for qualified dependents of domestic partners are generally taxable to the employee.
- Tuition Reimbursement for Bargaining Unit Employees - reimburses eligible bargaining unit employees for the academic credit and non-credit courses (not offered by JHU).
- Tuition Reimbursement for Faculty and Staff in Outlying Areas - reimburses eligible full-time JHU faculty and staff for part-time studies for coursed not taken at Hopkins due to the employee's work location.
- Tuition Reimbursement Plan for Part-time Undergraduate Education for Faculty and Staff - reimburses eligible full-time JHU faculty and staff for part-time studies for courses not offered at Hopkins.
For more information about these plans go to http://benefits.jhu.edu/tuition/
Scholarships awarded through financial aid - Private gift and endowed scholarship funds for tuition awarded by committee review through the financial aid offices are occasionally awarded to a full-time or part-time employee. In these cases, the award is based on a needs-based or academic criterion (or both) that is not related to employment at the University and is treated as a tax-free tuition scholarship.
Departmental payments - amounts provided by departments do not qualify for IRS tax exemptions and are fully taxable to the employee:
- Departmental aid - these amounts are generally provided for graduate courses. The
amounts are fully taxable regardless of the source of the funds (sponsored or
non-sponsored funds). The payments are not eligible for the IRS exclusion limit of
$5,250. The amount is added to the employee's taxable compensation in payroll and taxes are
withheld. Since this is a non-cash payroll adjustment, the employee's net pay is decreased
by the amount of the taxes withheld.
The tax impact to employees for non-cash payroll adjustments: Generally, employees will be taxed in the quarter following the transaction posting to the student information system. To lessen the impact the amount is spread over 5 semi pays except for the final quarter, see below. The additional tax will be deducted directly from paychecks, reducing net pay.
a. Departmental aid posted to the student accounts between January 1 and March 31 will result in tax withholdings beginning April 30 through June 30. b. Departmental aid posted between April 1 and June 30 will result in tax withholdings beginning July 31 through September 30. c. Departmental aid between July 1 and September 30 will result in tax withholdings beginning October 30 through December 31. d. Departmental aid posted between October 1 and December 31 be directly adjusted as of December 31 and reflected on the W-2 for that calendar year. Employees must be aware of this as federal tax withheld adjusted and used to cover the FICA taxes (Social Security and Medicare). Employee may need to increase taxes withheld during the year in anticipation or file an estimated tax payment.
- Tuition paid to reimburse employees - tuition reimbursements by departments to employees are fully taxable and should be paid through payroll as a supplement. Taxes are withheld from the payment. Contact payroll for the wage type to use on the ISR.
- Tuition paid on behalf of an employee - tuition paid by departments to an institution for employees is fully taxable to the employee. While this is paid through Accounts Payable, the amount is added to the employee's taxable compensation in payroll and taxes are withheld. Since this is a non-cash payroll adjustment, the employee's net pay is decreased by the amount of the taxes withheld.
The tax impact to employees for non-cash payroll adjustments: Generally, employees will be taxed on the full amount in one pay period depending on the amount of the payment. The additional tax will be deducted directly from paychecks, reducing net pay.
Last updated on: April 13, 2021