Tax Tip:  Educational Benefit Taxation

  • October 19th, 2020
  • in News

Educational benefits received by a University employee, his/her spouse, and/or child(ren) may be taxable to the employee.

Some examples of taxable educational benefits include:

  • Tuition benefits for a child who is not an IRS dependent of the employee, including a child who is age 24 or over during the calendar year
  • Graduate level tuition benefits for a spouse or child (limited exceptions may apply)
  • Graduate level tuition benefits for an employee in excess of $5,250 per calendar year (limited exceptions may apply)

For those educational benefits which are taxable, Federal, State, and Social Security taxes will be withheld from the employee’s payroll checks at the end of each semester in which the educational benefit was received.  Taxes will be withheld over four (4) pay periods for biweekly-paid employees and over two (2) pay periods for monthly-paid employees.

The Tax Office will notify the employee by email in advance of the taxation.  The taxable educational benefit will appear as a line item on the employee’s pay stub in each period where taxation occurs.  The number shown on the pay stub is the amount of benefit that is being taxed in that pay period, not the amount of taxes being deducted.  The tax deduction amounts will vary depending on the employee’s individual tax bracket and filing status.

For further details, refer to the following website links:

http://taxoffice.ua.edu/fringe-benefit-taxation/#Education

http://hr.ua.edu/benefits/other-benefits – see Policy 702.00 Educational Benefits