If the IRS challenges the University’s interpretation of the Internal Revenue Code with regard to tuition benefits, you may be liable for income tax on the cash value of the benefits, plus any penalty and interest assessed. Please consult your tax advisor for specific IRS tax regulations.
On What Can the Support Staff Member be Taxed?
If the Tuition Exemption Benefit is for an undergraduate course, it is not considered taxable income unless the student covered by a staff member’s Tuition Exemption Benefit is taking the course as part of a graduate degree program.
Beyond the support staff member’s first $5,250 in a calendar year as a graduate student, any additional Tuition Exemption in a calendar year that pays for graduate-level education is treated as taxable income, with the following exceptions:
- The benefit is not taxable if the Support Staff member is taking graduate-level courses as part of an undergraduate degree program.
- The benefit is
not taxable if the Support Staff member is taking graduate-level education (either in a
degree program or as non-degree courses), that is considered "job related"
according to the following criteria established by the IRS:
a) The education maintains or improves skills required in your current job
b) The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer
c) The coursework is not needed to meet the minimum educational requirements of your current job.
d) The coursework is not part of a program or study that will qualify you for a new trade or business, nor is it a Ph.D. or other doctoral program.
Note: As long as the job-related course or program "improves skills needed for the current job based on the skills identified in the job description," it does not qualify you for a new trade or business.
If a Support Staff member is enrolled in graduate-level education which meets the above criteria for tax exemption, the Support Staff member must fill out and submit a Job-Related Graduate Education Certification Form (Non-Degree Courses or Degree Program) to be eligible for the tax exemption. The completed form, signed in ink by the employee and their supervisor and submitted to Student Financial Services in 205 Kent Hall (Morningside) or Registration & Financial Services @ CUMC in 1-141 Black Building (Medical Center), ensures that no taxes related to the tuition benefit will be withheld from the employee's paycheck. This form should be attached to and submitted with the Tuition Benefit Eligibility Form.
Support Staff’s Spouses and Dependents
There is no taxation cutoff for the amount of Tuition Exemption in a calendar year. The value of all Tuition Exemption that pays for graduate-level courses for a staff member’s spouse and dependents is considered part of the staff member’s taxable income, unless a graduate-level course is taken as part of an undergraduate degree program.
Support Staff’s Same-Sex Domestic Partners and their Dependents
The value of tuition exemption for same-sex domestic partners and the dependents of same-sex domestic partners is considered taxable income by the federal government, and therefore Columbia will withhold taxes. This applies to both undergraduate and graduate courses.
Income Tax Withholding for Support Staff
The cash equivalent of any taxable tuition benefit will be included in your income statement on your pay stub under “Taxable Tuition.” This will affect the amount of federal, state, local, and FICA taxes deducted from your pay.
The deductions occur on an annualized basis as follows: The amount of taxable tuition is added to your base salary. The resulting total is taxed according to the annualized table, which is based on your income level.
The University will try to spread the tax liability for tuition benefits over as many pay periods as possible:
- Fall Term: Taxes withheld October through January (seven paychecks)
- Spring Term: Taxes withheld February through May (seven paychecks)
- Summer Term: Taxes withheld June through September (seven paychecks).
If the Tuition Benefit Eligibility Form and Job-Related Graduate Education Certification Form (Non-Degree Courses or Degree Program) are not submitted by the end of the Change of Program period each term, the University will withhold taxes. Support Staff who can prove the courses are job-related may be eligible to deduct the income from their reported taxable income on their Form 1040 filing.
Taxable Tuition is reflected on Form 1098-T issued by Columbia University.
In cases where the staff member does not receive a W-2 form—due to an unpaid leave of absence, retirement, or death—the University reports the income to the government using a Form 1099, a copy of which is sent to the support staff member (or to the student, if the staff member is deceased) at the end of the calendar year.
Questions about the amount of taxable tuition reported to the Payroll Office should be directed to the Tuition Exemption area of central Student Financial Services at (212) 854-6548 or firstname.lastname@example.org.