Graduate Tuition Tax Implication

In compliance with section 127 of the IRS regulations, Human Resources will assess the tax applicability of graduate tuition benefits for each calendar year. The assessments will be made after the class drop period (last day to withdraw at 25% tuition refund, see http://www.reg.tcu.edu/site2001/calendar.asp for actual dates). Benefits related to undergraduate tuition remain non-taxable at this time.

For employees, only the graduate tuition benefit that exceeds $5,250 (IRS exemption for employees - calendar year 2007) is taxable. However, all graduate tuition benefits for spouses and domestic partners is taxable regardless of the tuition benefit value as there is no IRS exemption for spouses or domestic partners.

Tax Impact for Employees
(Calendar Year 2007)

Employee as Student
 Spouse/Domestic Partner as Student
  • the value of graduate tuition benefits that exceed $5,250 (IRS exemption for employees)
  • Examples
John, TCU employee, took 3 hours of graduate course work in the calendar year for a total tuition benefit of $2,400. John is allowed an annual IRS exclusion of $5,250. John’s taxable benefit is $0 since the exclusion is greater than the tuition benefit.
Sue, TCU employee, took 9 hours of graduate course work (3 hours – Spring, 3 hours – Summer, 3 hours - Fall) in the calendar year for a total tuition benefit of $7,200. As an employee Sue is allowed an annual IRS exclusion of $5,250. Sue’s taxable benefit is $1,950 [$7,200 (Tuition Benefit) - $ 5,250 (IRS Exclusion Amount)]. The taxable benefit of $1,950 will be subject to tax withholding.
  • the total graduate tuition benefit value
  • Examples
Jim, spouse of Donna (TCU Employee), took 3 hours of graduate course work in the calendar year for a total tuition benefit of $2,400. There is no IRS exclusion for spouses. Donna’s taxable benefit is for the total tuition benefit of $2,400 for her spouse. The taxable benefit of $2,400 will be subject to tax withholding.

For each employee, the tuition benefit will be based on the amount of disbursed tuition benefit for employee/spouse/domestic partner in the calendar year. Tuition benefits for employees are awarded apart from their spouse or domestic partner.

For taxable graduate tuition benefits, withholding period will begin for the spring semester March, April, and May.

For taxable graduate tuition benefits, withholding period will begin for the summer semester June, July, and August.

For taxable graduate tuition benefits, withholding period will begin for the fall semester October, November, and December.




Human Resources - TCU Box 298200 Fort Worth, TX 76129 - PH: 817.257.7790 - Fax: 817.257.7979 - Contact Us