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Employees may be subject to taxation of Tuition Waiver Benefit

Under IRS regulations, each year the University of Colorado is required to tax employees on particular benefit costs that are waived for an employee’s benefit. If employees come to you with questions regarding a lighter November paycheck, they may have been required to pay taxes on their Tuition Benefit Waiver.

The following tables outline taxation rules specific to this benefit:

Graduate level classes
Employees only Qualified dependent spouses and children
Under IRS Section 127, tuition waived for employees is tax-free up to $5,250 per calendar year. Any waived tuition that exceeds this amount in a calendar year is taxable. Tuition costs for qualified dependent spouses and children enrolled in graduate courses are taxable.
Undergraduate level classes
Employees only Qualified dependent spouses and children
Under IRS Section 117, employees using the Tuition Waiver for undergraduate courses is tax-free. Under IRS Section 117, dependent spouses and children using the Tuition Waiver for undergraduate classes is tax-free.

If an employee’s benefit is taxable, they are required to pay the Supplemental Federal tax rate of 25 percent, the State tax rate of 4.63 percent, the Social Security tax rate of 6.2 percent and the Medicare tax rate of 1.45 percent. This total tax rate of 37.28 percent will be reflected in the employee’s November paycheck.  

Notices will be emailed

Employees eligible for taxation will be sent an email detailing this information during the week of Nov. 20. Please direct them to check their inboxes and junk folders for this message.

If additional questions or concerns arise, please direct employees to email tuitionbenefit@cu.edu or visit our website.

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