Tuition Remission is considered a fringe benefit by the taxing authorities, which means it may be taxable depending on the situation. An explanation regarding what makes tuition taxable can be found on the UHR website here.
If applicable, tuition is taxed at the following rates:
- Federal – 22%
- State – 8%-9% depending on the county of residence
- FICA – 7.65%
Tuition remission taxing is done through the employee’s paycheck as follows:
- The Winter/Spring semester is taxed over 5 pay periods March – May
- The Summer semester is taxed over 4 pay periods July – August
- The Fall semester is taxed over 5 pay periods October – December
On the employee’s pay stub there will be a description of TUITION FR VAL on both sides. This is the value the employee is being taxed on, not the amount being withheld from the pay stub.
On the left hand side of the pay stub, the value to be taxed is added to the employee’s gross wages. The employee is then taxed based on the above tax rates. On the right hand side of the pay stub, the value to be taxed is then deducted since it is not money actually earned. Only the additional taxes associated with the tuition remission value is actually withheld from the employee’s pay.