If the Internal Revenue Service (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.
Taxation of Undergraduate Courses (Below 4000)
Officers, Spouses, and Their Children
As per IRS regulations, the Tuition Exemption Benefit for an undergraduate course is not treated as taxable income, unless the student covered by an Officer’s Tuition Exemption Benefit is taking the course as part of a graduate degree program.
Same-Sex Domestic Partners and Their Children
The value of any Tuition Exemption Benefit for same-sex domestic partners and their children is treated as part of the Officer’s taxable income by the federal government and, therefore, Columbia University will withhold taxes.
Taxation of Graduate Courses (4000 & Above)
The first $5,250 in a calendar year is exempt from taxation according to IRS regulations. Any additional Tuition Exemption in a calendar year that pays for graduate-level courses is treated as taxable income, with the following exceptions:
- The benefit is not taxable if the Officer is taking graduate-level courses as part of an undergraduate degree program.
- The benefit is not taxable if the Officer takes graduate-level courses that are considered “job related,” fulfilling the following two conditions established by the IRS:
- The course either maintains or improves skills required in your current position and/or is required by the University, or by law or regulations, to keep your current job or salary; and
- The course does not enable you to meet the minimum education requirements for your current job, and does not qualify you for a new trade or business.
Note: Graduate courses taken as part of a doctoral program cannot be job-related. According to IRS regulations, they always qualify the student for a new trade or business.
In the event an Officer takes a graduate course that meets the above conditions for tax exemption, the Officer must fill out and submit a Job-Related Graduate Course Certification in order to avoid tax withholding. The completed form, signed in ink by the Officer’s 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 Officer’s paycheck. This form should be attached to and submitted with the Tuition Benefit Eligibility Form.
Officers’ Spouses and Children
The value of all Tuition Exemption that pays for graduate-level courses for an Officer’s spouse and children is treated as part of the Officer’s taxable income, unless a graduate-level course is taken as part of an undergraduate degree program. Therefore, Columbia will withhold taxes based on the flat tax rates.
Officers’ Same-sex Domestic Partners and Their Children
The value of any Tuition Exemption for same-sex domestic partners and their children is treated as part of the Officer’s taxable income by the federal government. Therefore, Columbia will withhold taxes based on the flat tax rates.
How Withholding Works
Income Tax Withholding for Officers
The cash equivalent of any taxable Tuition Exemption Benefit (as explained above) will be included in the Officer’s income statement, on the pay stub under “Taxable Tuition.” This will affect the amount of federal, state, local and FICA taxes deducted from the Officer’s pay.
The taxation of the Tuition Exemption Benefit is determined on an annualized basis. The amount of taxable tuition is added to the Officer’s base salary. The resulting total is taxed according to the annualized table, which is based on the Officer’s income level. The University will withhold taxes based on the federal, state and New York City (if you reside in NYC) flat tax rates. The full value of the Tuition Exemption Benefit will also be subject to FICA and Medicare payroll taxes. For information about tax rates, please visit the Columbia Payroll website at: http://finance.columbia.edu/content/tax-withholding-information.
The University will spread the tax liability for tuition benefits over as many pay periods as possible:
- Fall Term: Taxes Withheld October through December
- Spring Term: Taxes withheld January through May
- Summer Term: Taxes withheld June through September
If the Tuition Benefit Eligibility Form and Job-Related Graduate Course Certification are not submitted by the end of the Change of Program period each term, the University will withhold taxes. Officers 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 1098T issued by Columbia University.
In cases where the Officer does not receive a W-2 form—due to an unpaid leave of absence, retirement, or death—the University reports the Tuition Exemption as income to the government using a Form 1099, a copy of which is sent to the Officer (or to the student, if the Officer 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.