Take the Quiz
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 University of Illinois Financial Literacy Badges Program.
Qualifying for Waivers
As a Graduate Assistant, Pre-professional Graduate Assistant, Research Assistant or Teaching Assistant, you qualify for tuition & fee waivers if:
- total appointment is between .25 - .67 FTE
- you work 91 days of the Fall/Spring Semester or 41 days of the Summer Semester, and
- you are registered as a graduate student at one of the universities in the University of Illinois System for the semesters of appointment.
For more information on tuition waiver eligibility through assistantships, please refer to the Graduate College Handbook (Urbana) or the Graduate College site (Chicago).
Understand if You're Affected
Federal law requires withholding of taxes from taxable income.
Graduate level tuition & service fees may be waived as a benefit of employment. Along with employment wages, tuition and service fee waivers are considered taxable income and subject to tax withholding.
Any waivers without the “tuition” or “service fee” designation received as a benefit of employment is essentially tax-free money.
Identify Your University Position(s)
The type of position or positions that you hold in the University of Illinois System impacts the taxability of your graduate level tuition and service fee waivers.
- If you only have a graduate assistantship, your tuition & service fee waivers are taxable.
- If you only have a teaching assistantship or a research assistantship, your tuition & service fee waivers are not taxable, because they are specifically excluded by IRC 117.
- If you have a fellowship, your waivers are not taxable from an employer perspective, but how you use the fellowship funds can impact their taxability.
If you have a fellowship, and that’s the only type of funding you have to worry about, you can find more information on the IRS website or you can consult with a financial professional for clarification.
You are not affected by the taxability of graduate level tuition & service fee waivers if...
- Your only employment type is as a Research Assistant or Teaching Assistant
- Your tuition & service fee waivers do not exceed $5,250 per calendar year (IRC §127)
- Your waivers are from a fellowship. Fellowships are not considered employment and the waivers are not taxable from an employer perspective
Hold more than one position? Consider the 50% Rule
IRC §117 specifically excludes taxation for Research Assistants and Teaching Assistants whose positions equal 50% or more of their total employment with the University of Illinois System.
Determine Timing of Additional Withholding
If you’ve identified that you’re going to see additional taxes taken out for your tuition and service fee waivers, you’ll want to know when the additional withholding will occur.
Taxes must be withheld in the same calendar year as they are received. As a result, the additional withholding for tuition and service fee waivers occurs in the same semester in which they are received.
- For the fall, the additional withholding occurs in October and November, with a makeup or adjustment run in December.
- For the spring, the additional withholding occurs in March and April with a makeup run in May.
- Over the summer, it occurs in July & August.
Calculate the Impact
In order to calculate the potential impact of your tuition & service fee waivers tax liability, you’ll need to use the appropriate University Payroll & Benefits Net Pay Calculator, located on the University Payroll & Benefits website.
Collect Information Needed
In order to calculate the potential loss of income using the Net Pay Calculator, you will need:
- Your earnings statement, which is available on the System HR Services website, or your position offer letter, so you can reference your gross pay (pay before taxes & other deductions are taken out)
- Your W-4 allowances, also available in System HR Services. If you are an international student, you may need to talk to University Payroll & Benefits if you do not remember what you put during your tax status review appointment.
- Your tuition & service fee waiver amounts from student self-service or your student portal
Use the Net Pay Calculator
In order to use the net pay calculator, you will need to
- Total all taxable tuition and service fee waivers received
- Subtract $5,250
- Subtract amounts already taxed from previous semesters, if applicable
- Identify number of pay periods to divide by, which is 2 if paid monthly & 4 if paid bi-weekly
- Use the tax calculator to determine your net pay
Make an Appointment
You can get individualized help calculating the taxability of your tuition waivers and developing a financial plan for yourself.
Throughout your academic career, you are in constant transition, creating constant challenges for financial decision-making and an environment that makes it easy to develop poor financial habits. Developing a financial plan can help you manage spending and establish healthy habits that will help you throughout your life.
You can request an appointment with a University of Illinois System Student Money Management Center representative here.
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 usually offers Sprintax tax preparation software to international students at UIC. Please contact them to learn more.
- It's important to note that regardless of the tax preparation software you use, you may have to pay additional fees to use extended features of the program, like state-level filing through the software.
Other Online Resources
There are several online resources to assist you in preparing for the Taxability of Tuition waivers.
- University of Illinois System USFSCO's Student Money Management Center's web page contains more information about tuition waiver taxability for graduate assistants.
- 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. Use the University of Illinois Extension website Choosing a Financial Pro if you need tax advice.