The IRS does not require taxation of tuition remission benefits for undergraduate courses, unless the spouse or child is not claimed as a dependent on the employees’ tax return.
As of January 1, 2002, tuition remission benefits for employees for graduate level courses will no longer be taxed unless the amount remitted exceeds $5,250.00.
If the remission does exceed the $5,250 maximum, the employee will be taxed on the amount above the maximum threshold, unless the program is either required as a condition of employment, or would maintain or improve the skills for the current position AND the course(s) will not qualify for the minimum educational requirements of the position AND the course(s) will not qualify the employee for a new trade or business.
If the graduate level courses meet the above non-taxable conditions, a Nontaxable Tuition Remission Graduate Supervisor Certification must be included with the Tuition Remission Request Form and Taxability Affidavit. Tuition remission for spouses and dependents at the graduate level will continue to be taxed. The amount to be taxed will be added to the employee’s paycheck over set pay periods and taxes will then be deducted. To determine what Tuition remission would be taxable, view Tuition Remission – Tax Chart