Graduate level tuition and service fee waivers that are a benefit of employement are considered taxable income by the IRS. As a result, you may see a reduction in your take-home pay for the months of October, November and possibly December of the fall semester, and March, April and possibly May of the spring semester.
The following information includes a collection of resources to help you plan for this potential loss of income.
More information about the taxability of tuition waivers is located on the Student Money Management Center's website as well as the University Payroll & Benefits website.
How to Calculate the Impact of Withholding On Your Pay
- Total all the tuition and service fee waivers YTD.
- This can be found by logging into your student account.
- Subtract $5,250. More analysis may be needed:
Identify number of pay periods to divide by (according to the tuition waiver taxation schedule).
- Spring Semester: amount over $5,250 taxable.
- Summer Semester: YTD amount over $5,250 taxable. Subtract taxable amount from Spring already taxed.
- Fall Semester: YTD amount over $5,250 taxable. Subtract taxable amount from Spring or Summer already taxed.
Use the appropriate tax calculator to determine withholding.
- 4 if paid biweekly & using the biweekly calculator.
- 2 if paid monthly & using one of the monthly calculators.
There are several online resources to assist you in preparing for the Taxability of Tuition waivers.
- USFSCO Student Money Management Center's web page contains information that was covered during the workshops.
- University Payroll & Benefits' web page has important information and calculators to help you estimate the impact this withholding will have on your pay.
- University of Illinois Extension, the educational outreach arm of the University, has Getting Through Tough Financial Times to assist in managing the potential loss of income as well as Choosing a Financial Professional to assist with seeking financial advice.
- Questions about taxability of your fellowship funds? Read the IRS publication specifically on scholarship and fellowship funds. You can also use the University of Illinois Extension website Choosing a Financial Pro if you need tax advice.
International Student Resources
If you are an international student, there are many factors that may complicate your situation. Here are some resources to help you navigate filing taxes and understanding withholding.
- To set up a Tax Status Review with University Payroll & Benefits, go here.
- International Student and Scholar Services (ISSS) at Univerisity of Illinois at Urbana-Champaign provides Glacier tax preparation software to their students.
- Office of International Services at University of Illinois at Chicago has historically provided Windstar tax preparation software to their students. You can contact them directly for more information.
If you want to review the slides from our recent workshops, please visit http://go.illinois.edu/TaxationofWaiversPPT.
Test your knowledge of the taxability of tuition waivers by completing this quiz.
Submission of the quiz results also counts towards the Earning badge, part of the Financial Literacy Badges Program.
Financial education is a lifelong process, so take advantage of the opportunities to learn about money management while you're at Illinois.
USFSCO's Student Money Management Center plans educational events throughout the semester to help you learn more about money management in general. Consult our online calendar to learn more about what we're doing to help students improve their financial knowledge and skills.
- November 11: What's Your Job Worth? Register.
- March 3: Cover Your Assets. Register.
- April 24: Reports, Scores & Histories: Credit Secrets Revealed. Register.
We facilitated a tweet chat on Taxability of Tuition Waivers last year. You can read the storify of it here.