Tuition Remission Tax Information
The Internal Revenue Service (IRS) and the State of California Franchise Tax Board determine the taxability of certain tuition benefits received by an employee and their dependent(s) or Registered Domestic Partner (RDP). As the following table illustrates, taxation is based upon the student-to-employee relationship and the course level of the classes taken. Under certain conditions, the IRS does allow an exemption of $5,250 per year per employee (Section 127 of Internal Revenue Code. Note: IRC Sec. 127 only applies to employees; it does not apply to spouses, dependents, or RDPs [unless they are ALSO employees]).
| Course Level | Student is Employee | Student is Spouse or Dependent Child of Employee | Student is RDP |
|---|---|---|---|
| Undergraduate, Graduate Research Analyst, Certificate Programs and non-Credit Classes Below the Graduate Level | Not Taxable | Not Taxable | Federal - Taxable State - Not Taxable |
| Graduate (see details below) |
Federal - Taxable State - Taxable |
Federal - Taxable State - Taxable |
Federal - Taxable State - Taxable |
| Exemption Amount | $5,250 annually in calendar year (Jan-Dec). | 0.00 | 0.00 |
Taxation Schedule
In accordance with applicable federal and state tax laws, USF will withhold taxes from the employee's gross wages according to the following schedule. The total taxable tuition remission benefit amount will be divided by the number of months listed below. The IRC Sec. 127 $5,250 qualified exemption (if applicable) will be applied during the first tuition application terms in the year until the entire $5,250 exemption is exhausted. Adding and/or dropping a course will be integrated into the billing cycle(s) on a monthly basis and is contingent upon timely completion of necessary paperwork. If the paperwork is not received in the appropriate department (Enrollment Management or Office of Human Resources) in a timely fashion, the amount of the tuition benefit will be taxed over a shorter period of time thereby increasing the tax withholding amounts and decreasing the employee's net pay. Any and all adjustments will be made in a payroll period dedicated to adjustments (general timeline is below). For more detailed payment schedules (monthly and semi-monthly) review the 2024 Integration Calendar.
| Term | #Months | Month 1 | Month 2 | Month 3 | Pay Date Adjustments |
|---|---|---|---|---|---|
| Intersession/Spring | 3 | Feb | Mar | April | May 22 |
| Summer | 3 | June | July | Aug | Sep 22 |
| Fall | 3 | Sep | Oct | Nov | Dec 22 |
After the census date each term, and based upon the enrollment on that date, Human Resources will send an email to the employee outlining the tax impact for the pertinent payroll integration period. Employees who do not receive this email are responsible for notifying Human Resources that they should be taxed. Tax periods cannot be extended past the term noted on the above table for any reason.
If an employee's gross pay is not sufficient to cover the tax liability, the employee will be required to pay the taxes owed prior to the first day of classes; otherwise, the student receiving these tuition remission benefits will be administratively withdrawn.
If an employee terminates employment within a taxing period, the employee will be required to pay the taxes owed or unenroll from classes prior to the termination date.
Questions related to the taxable remission amounts should be directed to Human Resources at 415-422-6707 or humanresources@usfca.edu.
Tuition Remission Taxation Examples
Case 1: Sally is a System Analyst working in the Information Technology Services (ITS) Department. Sally takes 12 credit hours of undergraduate coursework in the Fall Term. Sally applies for and is approved to receive the Tuition Benefit. The tuition benefit received is $12,000. Because the course work is undergraduate, Sally is not taxed.
Case 2: John is Sally's youngest son (from Case 1). John is taking undergraduate level classes for $7,840 in the Fall Term. This benefit is not taxable. In contrast, Sally's oldest son Tom is taking graduate level classes for $12,000 in the Fall Term. Therefore, Sally's gross taxable income will be increased by $4,000 per month in October, November, and December, and net pay will be reduced by approximately 37.05% or $1,482 per month.
Case 3: Michael is an Adjunct Faculty PHP member and is currently not teaching in the Summer Term. Michael can use the Tuition Remission Benefit, but Michael does not have a gross wage from a current assignment. Michael's son takes 3 credit hours of graduate work (taxable) and the tuition benefit received is $4,665. Michael must pay the tax directly at the yearly taxation rate, approximated at 37.05%. Michael must submit a personal check made payable to USF of $1,728.38 directly to Human Resources before the first day of classes.
Taxation Integration Calendars
2024 Tuition Remission Taxation Integration Calendar
Questions?
Please email tuitionremission@usfca.edu with any questions about this benefit.