Graduate Tuition Tax Implication

Section 127 of the IRS Code states all graduate coursework is to be taxed after $5,250 of educational assistance is given per employee per calendar year. At that time, any tuition value above the $5,250 exclusion will be added to your taxable gross as if it was compensation, box 1 of your W2, and then taxed accordingly.

  • HR will assesses applicable tax for graduate tuition benefit after the award has been posted to student account.
  • The additional taxable income and taxes will be withheld on each paycheck
  • The taxable graduate tuition amount is reported on a W-2 form in box 1,2, and 5
  • Taxable graduate tuition amount is subject to Federal, Social Security and Medicare Taxes


 Taxable graduate tuition tax will be assessed once award is posted to student account and HR has been notified.

  • Employee ~ Graduate Tuition value above $5,250 will be taxed
  • Spouse/Domestic Partners~ All Graduate Tuition is taxable
  • Dependents~ All Graduate Tuition is taxable


The value of graduate tuition benefits that exceed $5,250 (IRS exemption for employees)


John, TCU employee, took 3 hours of graduate course work in the calendar year for a total tuition benefit of $2,400. John is allowed an annual IRS exclusion of $5,250. John's taxable benefit is $0 since the exclusion is greater than the tuition benefit.

Sue, TCU employee, took 9 hours of graduate course work (3 hours-Spring, 3 hours-Summer, 3 hours-Fall) in the calendar year for a total tuition benefit of $7,200. As an employee Sue is allowed an annual IRS exclusion of $5,250. Sue's taxable benefit is $1,950 [$7,200 (Tuition Benefit) - $5,250 (IRS Exclusion Amount)]. The taxable benefit of $1,950 will be subject to tax withholding.


Contact Shelli Barr Mathis at if you have any other questions.

For each employee, the tuition benefit will be based on the amount of disbursed tuition benefit for employee/spouse/domestic partner/dependent in the calendar year. Tuition benefits for employees are awarded apart from their spouse/domestic partners/dependents. Benefits related to undergraduate tuition remain non-taxable at this time.