Community Exchange

Good morning:

Does anyone have any information/experience on whether institutions that offer a tuition discount to benefits-eligible employees who are also students consistent with what other students receive would need to treat this (the difference between full and discounted rate) as a taxable benefit?

Thank you,

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Kevin Doyle
President & CEO
Hazelden Betty Ford Graduate School
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Graduate tuition remission is generally considered taxable income. The IRS allows a full reduction of tuition charges to employees, their spouses, and dependent children for undergraduate coursework to be excludable from gross income. However, for graduate education, the value of the tuition remission exceeding the $5,250 exclusion is taxable income. This means that any amount of graduate tuition remission that exceeds the $5,250 limit must be added to the employee's taxable wages and reported on the W-2 form. The additional taxable income will be subject to federal, Social Security, and Medicare taxes.

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Barbara Aughenbaugh
Chief Financial Officer and Vice President, Administration & Finance
University of Baltimore
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Please also refer to these tax codes for specific information. 

IRC § 127

·       (any employer)

IRC § 117(d)

·       (educational institutions)

·       Graduate tuition reductions are non-taxable when the graduate student is engaged in teaching or research under the rule in § 117(d)(5)

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Liz Clark
Vice President, Policy and Research
NACUBO
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Hi Kevin, 

If your institution provides discounts as opposed to scholarships, and uses the same mechanism to discount employee tuition then I believe it is a taxable benefit to the employee.  On a per employee and per course basis, it may be possible to exclude the value of a course or courses as working condition fringes under Section 132.  Reframing and establishing an educational assistance program that complies with Section 127 could allow for the $5,250. 

Melanie           

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Melanie Rodjenski
Tax Manager
University of Vermont
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