Tuition Tax Facts
Graduate level tuition reimbursement for Georgetown employees can be provided on a tax-free basis up to $5,250 per year. In limited situations, graduate level tuition reimbursement in excess of $5,250 can be provided on a tax-free basis as well. If you do not qualify for tax-free benefits, taxes will be automatically deducted from your bi-weekly or monthly paycheck. Georgetown University Payroll Services will calculate the required tax withholding amount and notify you, in writing, in advance of these deductions.
Tax-free tuition reimbursement in excess of $5,250 per year for graduate level courses can be provided if the following two conditions are both met. Those conditions are:
- The education must improve the skills required of the employee in his or her current job; and
- The education cannot prepare the employee for a new career.
Some examples may help show how the new rule works.
Example #1
John is an employee at Georgetown University and is enrolled in Georgetown's evening law school program. Under the prior law, the entire value of this benefit was considered a taxable benefit. Under the current law, beginning in 2002 the first $5,250 of the benefit can be provided tax-free. The amount by which the benefit exceeds $5,250 will be considered taxable income. This excess is considered taxable income because a law degree will prepare John for a new career (practicing law), even if he plans on remaining an employee at Georgetown after law school graduation (perhaps working at the Law Center or the General Counsel's Office).
Example #2
Jennifer is a staff accountant at Georgetown University and is enrolled in Georgetown University's MBA program. Her job description states that an "MBA is preferred but not required for this position". The entire value of Jennifer's tuition reimbursement provided by Georgetown in not taxable because it satisfies both conditions of the IRS's requirement.
Please note that because our tuition reimbursement program limits the payments for employees who attend non-Georgetown University institutions to an amount below $5,250 per year, as a practical matter all graduate level reimbursements made to outside institutions will be made on a tax-free basis in 2002. This may change in subsequent years depending on the level of tuition reimbursements made to outside institutions in the future.
In order for the Office of Faculty and Staff Benefits to properly administer this plan in accordance with the IRS requirements, we will require more information regarding our employees who are enrolled in graduate programs than we have needed in the past. We have prepared a form for employees to complete in order for them to request that their graduate level tuition benefits in excess of $5,250 be provided on a tax-free basis. Go to Tuition Forms to get a copy of this form. After you have completed this form, and you and your supervisor have signed it, send it through campus mail to:
Office of Faculty and Staff Benefits
Ground Floor, Healy Hall
Attn: Benefits Analyst, Tuition Assistance Program
OR fax it to: 202-687-2389.
You will be notified within two weeks, via email, confirming whether or not you meet IRS conditions for tax exemption of your graduate TAP benefit.
Don't forget! Make sure to re-apply for tax-free TAP benefits annually.
If you have any questions, please contact the Office of Faculty and Staff Benefits by emailing benefitshelp@georgteown.edu.
