Tuition Tax Facts

This page includes important information regarding the taxability of certain Tuition Assistance Program (TAP) benefits for employees, retirees and eligible dependent children. Please review carefully. Consult a tax professional for advice. Members of Office of Faculty and Staff Benefits are not tax professionals and are not able to provide advice.

Eligible TAP Recipient

Taxability of GU Non-Credit Certificate

Taxability of GU Undergraduate Enrollment

Taxability of GU Graduate Enrollment

Taxability of Non-GU (External) Graduate Enrollment

Active Employee

Exempt

Exempt

Exempt up to $5,250 per calendar year – Excess included in gross wages and taxes will be withheld*

Exempt up to $5,250 per calendar year – Excess included in gross wages and taxes will be withheld*

Active Employee Dependent Child

N/A – Benefit not provided

Exempt

When eligible, full TAP value included in gross wages and subject to tax withholding

N/A – Benefit not provided

Retiree

Exempt

Exempt

Exempt up to $5,250 per calendar year. Retiree TAP reported as earnings on W2 and subject to tax withholding

Exempt up to $5,250 per calendar year. Retiree TAP reported as earnings on W2 and subject to tax withholding

Retiree Dependent Child

N/A - Benefit not provided

Exempt

When eligible, full value reported as earnings on W2 and subject to tax withholding

N/A – Benefit not provided

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Active employees may request tax free treatment by submitting a Request for Tax-Free TAP Benefits for Graduate Study applications. We recommend that you apply as early as possible. For planning purposes, the University can review “tax free” requests prior to applying or acceptance in a graduate program. You should never assume that you will qualify for tax free treatment, and should anticipate added tax withholding on your earnings.

Please read the Tuition Remission Tax Liability policy for a better understanding of the review process.

In accordance with IRS guidelines, tuition benefit tax exemption might apply if:

  • The graduate education improves the skills required of the employee in his or her current job;
  • The graduate education is not a requirement in the current HR position description; and
  • The education does not prepare the employee for a new career.

The process for determining tax exempt TAP benefits includes submission of a “tax free” request and your official GU Position Description, obtained from your HR Client Services Partner.

EMPLOYEE TAP

Undergraduate or GU Non-credit:
Tax exempt

GU Graduate enrollment:

  • IRS allows first $5,250 per calendar year to be tax exempt. TAP in excess of $5,250 is automatically taxable. Please plan accordingly for the additional tax withholding before financially committing to your program.
  • TAP taxes are withheld in the same semester TAP is received, divided over 5-6 paychecks.
  • In very limited cases, Graduate TAP may be deemed tax exempt. Subject to IRS mandates.  Refer to GU Tuition Tax Facts: http://benefits.georgetown.edu/tap/tapfacultystaff/taxinfo

Outside School, Graduate enrollment:
If more than $5,250 is received within the same tax year, the excess amount is taxable. Otherwise, the benefit is tax exempt when less than $5,250 is received within the same tax year. Employees enrolled in both a GU graduate program AND taking graduate classes at an outside school are subject to taxation unless otherwise notified. The TAP tax will be assessed in late Fall for the entire tax year.

2017 Payroll Tax Rates:

Federal: 25%                                                    
Social Security: 6.2%
Medicare: 1.45%

DC: 9.0%  /  MD 7.95%  /  VA 5.75%

DEPENDENT CHILD TAP

Undergraduate:

  • Tax exempt

Graduate enrollment (for eligible employees):

  • Fully taxable to the GU employee -- no IRS $5,250 exemption
  • Active Employees: TAP taxes are deducted from a series of paychecks in the semester TAP is received.
  • Retirees: TAP amount is reported on a W-2 and mailed to the GU parent (not the GU student) 
  • Refer to IRS Publication 970 for additional information on employer-provided tuition assistance.  http://www.irs.gov/pub/irs-pdf/p970.pdf
     

TAX LIABILITY FOR EMPLOYEE TAP BENEFITS

When an employee receives TAP benefits to pay for Graduate courses, the IRS allows Georgetown University to remit the first $5,250 per calendar year tax free -- the amount in excess of $5,250 (per calendar year) is automatically subject to tax withholding.

TAP taxes are withheld from the employee's paycheck in the semester TAP is received.  The tax liability is roughly 40%, however, the exact calculation is completed by GMS and cannot be provided in advance. GU Payroll Services will setup the tuition tax withholding in installments – typically 3-4 for Monthly employees, and 5-6 for Biweekly employees.  GU Payroll Services notifies employee via email approximately one week in advance.

In limited situations, Employee TAP benefits might be deemed tax exempt. Certain IRS conditions apply, see bulleted list below. The decision is made by the GU Tax Department, based on interpretation of tax law, acting in the best interest of the University.

  • The education must improve the skills required of the employee in his or her current job;
  • The education cannot be a requirement for your position; and
  • The education cannot prepare the employee for a new career.

The process for determining tax exempt TAP benefits includes submission of a “tax free” request and your official GU Position Description, obtained from your HR Client Services Partner. 

Below are examples of situations that can affect the tax exempt decision: 

Example #1 
John is an employee at Georgetown University, enrolled in the Part-time JD program. 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 does not intend to use the degree for that purpose. 

Example #2 
Jennifer is a staff accountant at Georgetown University, enrolled in the 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 may be deemed tax exempt because it satisfies IRS conditions.

Example #3
Julius is a research assistant at Georgetown University, enrolled in the MPS Real Estate. The amount by which the benefit exceeds $5,250 will be considered taxable income.  Her job responsibilities as listed on the GU Position Description show no correlation to her academic curriculum.

TAX-FREE REQUESTS

Your submission of a tax-free request form is not automatically approved. It is thoroughly reviewed by the Office of Faculty and Staff Benefits for completeness, and then is sent to the Tax Department for a decision. You will be notified via email within two weeks, confirming whether or not your situation meets IRS conditions. All decisions are final and not subject to appeal. Decision are driven solely by IRS guidelines and cannot be influenced by the Office of Faculty & Staff Benefits or by departmental advocates.

Fall Semester tax-free request deadline: October 1

Spring Semester tax-free request deadline: March 1

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 tapbenefits@georgetown.edu. This form must be accompanied by the official GU Position Description available from your HR Client Services Partner.

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. 

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 tapbenefits@georgetown.edu