Employees or Family Members Enrolled in Advanced Degree Programs or Graduate Level Courses
For employees and their family members, IRC Section 117 permits undergraduate level tuition as a non-taxable benefit. If the family member is a dependent child of the employee's domestic partner, the employee will pay federal and state taxes on the imputed value of the tuition benefit for both undergraduate and graduate tuition. However, if the dependent child of the employee's domestic partner is the adopted or natural child of the employee, the tuition benefit is non-taxable.
Tuition assistance for family members enrolled in graduate level or advanced degree programs is included as taxable income to the employee. That is, the difference between the reduced tuition for total enrolled credit hours and the regular graduate tuition for total enrolled credit hours will be taxed. For staff members - but not for family members - IRC Section 127 allows up to $5250 in tuition reduction in a calendar year for graduate level or advanced degree programs as a non-taxable benefit. An employee whose graduate tuition reduction benefit exceeds $5250 in a calendar year is responsible to notify Human Resources. Taxable tuition benefits may be spread over a maximum of three months, and are processed by the employee's campus for tax withholding.
Taxes - Domestic Partners
Staff fee privileges for a domestic partner may result in additional imputed income (the difference between the reduced tuition for total enrolled credit hours and the regular tuition for total enrolled credit hours) to the employee. The university system will withhold federal and state taxes on the imputed value of staff fee privileges for undergraduate and graduate classes taken by an employee's domestic partner. Employees whose same-sex domestic partners take undergraduate classes are not subject to Oregon income tax on the imputed value. The university will provide the annual amount of the imputed income on the employee's W-2 form. The employee may need to seek tax advice regarding how to claim the associated Oregon income reduction. Please note that non-resident domestic partners' imputed tax value of staff fee rates is based on non-resident tuition rates under the provisions of OAR 580-010-0086.
Taxes - Nondiscriminatory Benefit
Under IRC 117, the staff fee plan is tested annually to determine that staff fee privileges for undergraduate courses may be offered as a non-taxable benefit to all employees. Tax status for staff fee privileges is updated at the beginning of winter term each year and provided to campus Human Resources offices. Employees should check on taxability changes when they request staff fee privileges.
Contact the Payroll Office with questions:
Anita Gurule, agurule3@uoregon.edu, 541-346-2975
