Human Resources Services

Announcements

January 29, 2000

TO: Members of the Campus Community
FROM: Elaine Vance
SUBJECT: Taxing Educational Benefits

Each year the taxing of educational benefits comes as a surprise to many. Information about the taxing of educational benefits is included on the application form provided by the Accounting Office; however, in the haste of applying, the information may be overlooked. I know the information below is complex; however, I hope it is helpful.

In all cases where the educational benefit is taxable, federal, state, Social Security, and Medicare taxes are deducted. The benefit is taxed the same as overtime or special pay; the tax is not based on your exemptions. Taxes are due at the time the benefit is paid.

For educational assistance, the taxes are deducted directly from the educational assistance check. The same is true for tuition assistance. Because there is no check or payment involved with tuition waiver, the taxes are deducted from the employee’s pay.

The following is an example of the taxes that must be paid supposing a three-credit course costs $1348.20:

Federal Tax	$377.50
State Tax	$ 90.08
Social Security	$ 83.59*
Medicare	$ 19.55
Total Taxes	$570.72

* Assumes earnings ceiling has not been met.

If you are requesting taxable educational assistance or taxable tuition assistance, you will receive a check in the amount of $777.48 ($1348.20 minus $570.72) to pay for the three-credit course. If you are requesting tuition waiver, the total taxes ($570.72) will be deducted from your paycheck.

The forms have been revised to emphasize the taxing requirements. If there are special conditions that must be met in order for the benefit not to be taxed, documentation must be provided.

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