Taxation

The Tuition Fee Waiver Program is a fringe benefit and as such has strict reporting requirements established by the Internal Revenue Service [Internal Revenue Code Sections 117(d), 127 and 132(d)] and the State of California Controller’s Office. The reporting requirements state that the fringe benefit must be taxed in the calendar year that the benefit was received.

All graduate-level coursework taken by an employee's spouse, dependent child or domestic partner will be reported as taxable income for the employee. Undergraduate-level coursework taken by an employee's domestic partner will also be considered taxable income.

Graduate/doctorate fees for employees are nontaxable if the total fees waived do not exceed $5,250 (educational assistance) per year. When the graduate/doctorate fees do exceed $5,250, the difference will be considered taxable income unless employees took job-related courses.

Eligible Participant Course Level(s) Tax Status
CSU Employee Undergraduate
Graduate
Nontaxable
Nontaxable up to $5,250 (unless job-related)
Employee's Spouse/Dependent Child Undergraduate
Graduate
Nontaxable
Taxable
Employee's Domestic Partner Undergraduate
Graduate
Taxable
Taxable
 

The flat tax rate is currently at 36.25 %: Federal tax (22%), State Tax (6.6%), Social Security tax (6.2%), Medicare Tax (1.45%).

The flax tax amount is calculated as follows:

Value of Fee Waiver x Flat Tax Rate = Flat Tax Amount Deducted from Employee’s Paycheck