Taxable Tuition Remission
What is taxable?
- Tuition remission for graduate courses take by a spouse and qualified dependents are taxable to the employee.
- Tuition remission for undergraduate and graduate courses taken by a domestic partner and related dependents are generally taxable to the employee.
When is the employee taxed?
The employee is taxed over five (5) pays for the tuition remission posted to the student's account in the prior quarter.
- Tuition remission processed between January 1 and March 31 will result in tax withholdings beginning April 30 through June 30.
- Tuition remission payments processed between April 1 and June 30 will result in tax withholdings beginning July 31 through September 30.
- Tuition remission payments processed between July 1 and September 30 will result in tax withholdings beginning October 30 through December 31.
- Tuition remission payments processed between October 1 and December 31 will result in tax withholdings beginning the following January 31 through March 31.
How is the employee taxed?
The amount of the tuition remission from the student system is divided by five (5) so that the value is taxed over five pays to spread the impact of the taxes withheld.
- The taxable amount (1/5) is added as a non-cash adjustment to your pay.
- The amount is included as taxable income and reported on your W-2.
- The amount is subject to FICA as well as federal and state income tax.
- The taxes are calculated based on your regular pay plus the tuition remission amount.
- Taxes withheld increase.
- Net pay (take home pay) decreases since the adjustment is non-cash.
How can an employee adjust the taxes withheld?
An employee can submit new tax forms to adjust taxes withheld for subsequent pays. Taxes withheld cannot be refunded.
Updated January 2010
