Taxability of Tuition Remission Benefit

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Q1: What is tuition remission?

A: Tuition remission is a benefit offered by many higher education institutions that waive or discounts tuition costs for eligible employees, their spouses, and/or dependents.

Q2: Is tuition remission for undergraduate courses taxable to the employee?

A: No, tuition remission for undergraduate courses is generally not taxable to employees, their spouses, or dependents, provided it meets IRS requirements for a qualified tuition reduction under Section 117(d).

Q3: Is tuition remission for graduate courses taxable?

A: Yes, generally. The value of graduate-level tuition remission is taxable unless:

  • The employee is receiving the benefit as part of a qualified educational assistance program, which excludes up to $5,250 per year from taxable income (IRS Section 127), or
  • The course qualifies as a working condition fringe benefit—i.e., it is job-related and necessary to maintain or improve skills.

Amounts above $5,250 that don’t meet the working condition exception are taxable.

Q4: How is taxable tuition remission reported and taxed?

A: The taxable portion of tuition remission is added to the employee’s gross income and reported on Form W-2. It is subject to:

  • Federal income tax withholding
  • Social Security and Medicare (FICA)
  • State and local taxes, if applicable

Employers may spread the taxable amount over several pay periods during the academic term.

Q5: Is tuition remission for spouses or dependents taxable?

A: 

  • For undergraduate courses, tuition remission for spouses and dependents is generally not taxable if the institution is a qualified educational institution.
  • For graduate courses, the remission is generally taxable to the employee unless the recipient is also an employee eligible for the benefit on their own.

Q6: Can the taxable portion be avoided if the coursework is job-related?

A: Yes, if the graduate-level courses are required by the employer or necessary to maintain or improve skills in the employee’s current job, the value may be excluded as a working condition fringe benefit, meaning it is not taxable.

Q7: Who should I contact with questions regarding my tuition remission benefit?

A: Questions regarding eligibility, application and/or approval please contact Human Resources at dmousaw@stlawu.edu

Question about when this will appear on your paycheck contact our payroll office at dmoschell@stlawu.edu

Q8: Where can employees find more information?