Fee Waiver: Potential Tax Implications

 

The Internal Revenue Code (IRC) provides three ways to make employer-provided training and educational assistance, including fee waivers and reductions, excludable from taxable income:

  1. Qualified Tuition Reduction under Internal Revenue Code Section 117(d);

  2. Educational Assistance Programs under Internal Revenue Code Section 127; and

  3. Working Condition Fringe Benefits under Internal Revenue Code Section 132(d)

  

By coordinating the three Internal Revenue Code Sections under the CSU Fee Waiver and Reduction Program the following tax-free or taxable benefits are available to CSU employees and their eligible spouses, domestic partners, and/or dependent children:

 

Eligible Participant

Course level(s)

Tax Status

CSU Employee

Undergraduate Graduate

Nontaxable

Nontaxable up to $5,250 per year (unless job-related)

Employee’s Spouse/

Undergraduate

Nontaxable

Dependent Child

Graduate

Taxable

Employee’s Domestic Partner

Undergraduate
Graduate

Taxable
Taxable

 

 

 

Information Regarding Taxation of Employees Fee Waiver Benefits

Taxes for the Fee Waiver will be at the supplemental rate of approximately 39.25% of the Fee Waiver amount and the taxes may be taken out of the paycheck following Census date or added to your W-2 at year end depending on the State Controller’s processing deadlines.

If you have any questions on the taxation process or amounts, please contact Darlene Edelman, Payroll Manager at 916-278-5597 or Darlene.edelman@csus.edu

 

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