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Taxation of Graduate Assistant & Pre-Professional Graduate Assistant Tuition Waivers FAQs
Note: The following information is intended only for Graduate Assistantship (GA) waivers. Teaching Assistantship (TA) and Research Assistantship (RA) waivers are not taxed, per IRS regulations. For the Chicago Campus there are no Pre-Professional Graduate Assisstantship Waivers.
- Taxability of Graduate Assistantship (GA) waivers (OBFS website)
- GA Tuition Waiver Overview - print handouts (OBFS website)
- GA Tuition Waiver Overview - Recorded Seminar (OBFS website)
- IRS Withholding Calculator - (right hand links, OBFS website)
- Monthly Tuition Benefits Net Pay Calculator - (right hand links, OBFS website)
- Monthly GA Tuition Benefits Calculator - (right hand links, OBFS website)
- Bi-weekly Tuition Benefits Net Pay Calculator - (right hand links, OBFS website)
- HR Templates of GA Offer Letters (HR website)
Frequently Asked Questions
Why are there tax withholdings on my tuition waiver?
All Graduate tuition and fee waivers are taxable unless exempt under the Internal Revenue Code.
Under the University's Educational Assistance Plan that is in compliance with Internal Revenue Code (IRC) §127, $5,250 per calendar year (January to December) in tuition and service fee waivers associated with Graduate Assistantships (GAs) and/or Professional Graduate Assistantship (PGAs) appointments are excluded from taxable income. If the amount of the tuition and service fee waiver exceeds $5,250, the excess is deemed income under the IRC and taxed accordingly.
Don’t you realize you’re creating a financial hardship for me?
We understand the additional withholding may create a hardship, unfortunately we are required by law to withhold.
Are there Assistants who are allowed to exclude their graduate tuition waivers from their income?
IRC §117 allows the exemption from taxation of tuition and fees waivers above $5,250 for individuals conducting teaching or research activities. The University considers a Teaching Assistant (TAs) or Research Assistant (RAs) as a graduate student who is involved in the following teaching or research activities:
TEACHING: For University tax purposes, teaching activities may include, but are not limited to, the following: providing or coordinating classroom instruction, including lab or discussion sessions; tutoring students; grading tests and assignments; developing instructional materials; providing artistic instruction; accompanying/coaching musical or vocal performances; and proctoring exams.
RESEARCH: For University tax purposes, research activities may include, but are not limited to, the following examples of applying and mastering research concepts, practices, or methods of scholarship: conducting experiments; organizing or analyzing data; presenting findings; collaborating with others in preparing publications; and conducting institutional research for an academic or administrative unit.
Is this a change in University policy?
No. Under federal tax law, a University employee who receives a graduate school tuition waiver in excess of $5,250 in a calendar year must treat the excess amount as additional taxable income (unless exempt as noted above). As a result, the University is required to withhold tax on the excess amount of the tuition waiver for GAs and PGAs and report this amount on Form W-2.
When will the tax withholding start?
Beginning with your March 2011 paycheck, the value of your tuition waiver will be included in your taxable income. The tax withholding will start on that pay period.
How much is the withholding?
If you hold a GA appointment, the value of the waiver that exceeds $5,250 will have a graduated witholding rate, based upon the assistant's personal information. The Office of Business and Financial Services has posted additional information.
What happens to the taxes that are withheld?
Both the amount of taxable income associated with the waiver and the taxes that the University withholds with respect to such income are reported on Form W-2. The taxes that the University withholds are forwarded to the IRS and credited to your tax liability for the year.
Is it possible that the tax withholding will result in my take home pay in the pay periods to be significantly reduced or reduced to zero?
Yes. Your tax liability may result in a zero paycheck depending on the value of your waivers and the pay you receive for the services you perform for the University. While the move to the graduated withholding rate should greatly change the number of students affected by zero paychecks, it will not totally alleviate the problem.
Who should I contact if I have specific questions?
If you have any questions regarding the taxability of your waiver, please contact the Payroll Service Center at:
- Chicago 312-996-7200
- Springfield 217-206-7200
- Urbana-Champaign 217-265-6363
Or via email at email@example.com.
For questions regarding your GA or PGA classification contact the appropriate campus office listed below:
- Chicago Human Resources 312-355-5524
- Springfield Graduate Assistant Office 217-206-6544
- Urbana-Champaign Human Resources 217-333-6747