Dependent Child TAP:
- Benefits used to pay for undergraduate degree programs are tax free.
- Benefits used to pay for Georgetown University (GU) graduate degree programs are fully taxable to the parent employed at GU, with no annual $5,250 tax exemption. The taxable benefit amount will be reported on the W-2 form.
- Benefits used to pay for GU undergraduate courses, and GU non-credit courses, are tax free.
- Benefits used to pay for outside schools (both undergraduate and graduate courses), are limited to less than $5,250 per calendar year, and are therefore tax free.
- Benefits used to pay for graduate courses at GU may have a tax liability. Please carefully read the section below entitled, "Tax Liability for Employee TAP Benefits".
Tax Liability for Employee TAP Benefits
GU Tuition Assistance Porgram (TAP) benefits are treated as income, and taxed per semester. The IRS allows GU to remit the first $5,250 per calendar year tax free. If an employee uses TAP benefits to pay for graduate courses at GU, in excess of $5,250 per calendar year, s/he will be subject to income taxes on the excess amount. The tax liability is roughly 40% of that balance. However, the exact calculation is completed in GMS and cannot be provided in advance. The taxes will be withheld from the employee's paycheck in the semester TAP was disbursed. GU Payroll Services will set up the tuition tax withholding in installments- typically 4 for monthly employees and 6 - 7 for biweekly employees. GU Payroll Services notifies employees via email approximately one week in advance.
In limited situations, the IRS allows employee tuition benefits to be provided tax-exempt. Some IRS conditions which must be met are as follows:
- The education must improve the skills required of the employee in his/her current job;
- The education cannot be a requirement for your current position; and
- The education cannot prepare the employee for a new career.
The decision for tax-free benefits is made by the GU tax department. The process includes submission of a "Request for Tax-Free TAP Benefits for Graduate Study" form. Refer to "Tax Free Requests" for details.
Fall Semester tax-free request deadline: October 1
Spring Semester tax-free request deadline: March 1
Below are examples of situations that can affect the tax-free decision:
John is an employee at GU and is enrolled in Georgetown's evening law school program. The amount by which the TAP 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 does not intend to use the degree for that purpose.
Jennifer is a staff accountant at GU and is enrolled in Georgetown's MBA program. Her job description states that "an MBA is preferred but not required for this position". The entire value of Jennifer's TAP benefit could be tax free if it satisfies IRS conditions.
In order for the Office of Faculty & Staff Benefits to properly administer tax-free TAP benefits in accordance with the IRS requirements, we will require specific information regarding our employees who are enrolled in graduate programs. Employees must complete the "Request for Tax-Free TAP Benefits for Graduate Study" to determine if their graduate-level TAP in excess of $5,250 can be provided on a tax-free basis. After you have completed this form, and you and your supervisor have signed it, submit it via email to firstname.lastname@example.org. This form must be accompanied by the official GU Position Description available from your HR Generalist.
You may also submit the form in person at the address below:
Office of Faculty and Staff Benefits
Darnall Hall, 2nd Floor, M-31
OR fax it to: 202-687-9148.
Your tax-free request is reviewed by our office for completeness, and the GU tax department for a decision. You will be notified by our office via email within two weeks, confirming whether or not you meet IRS conditions for tax exemption of your graduate TAP benefit. The decision is final and NOT subject to appeal. The decision cannot be influenced by the Office of Faculty & Staff Benefits or your department manager.
If you are deemed eligible for tax free TAP benefits, you must reapply every calendar year. If your situation is not deemed eligible for tax-free TAP benefits, that decision will stand unless you experience a change in your situation, such as a new position.
If you have any questions, please contact the Office of Faculty and Staff Benefits by emailing email@example.com.