MINNESOTA STATE COLLEGES AND UNIVERSITIES

Notice of Employer-Provided Educational Assistance
December 2011

The Minnesota State Colleges & Universities System has a written educational assistance plan to meet the requirements of Internal Revenue Code Section 127. The purpose of the plan is to exempt certain educational assistance benefits from taxation; the plan covers benefits provided under System personnel plans and bargaining agreements. Under federal and state law, the first $5,250 of tuition assistance used by the employee under the plan is not subject to income taxation. Separate rules apply to spouses and dependents (see below).

Review your applicable employee bargaining agreement/personnel plan for details regarding educational benefits. Please contact your campus Human Resources Office with any questions.

Employee Income Tax Consequences

If you are an employee of Minnesota State Colleges & Universities and you take undergraduate level courses via tuition waiver, you are not subject to taxation on any benefits received (i.e., there is not a dollar limitation for tax purposes under Internal Revenue Code Section 117). However, if you receive tuition reimbursement (not tuition waiver) for undergraduate level courses, you will be subject to taxation on tuition in excess of $5,250 in a calendar year. You will also be subject to taxation on graduate level tuition waiver and/or reimbursements received in excess of $5,250 in a calendar year.

Special rules for spouse/dependent(s): Tuition waivers for undergraduate level courses taken by spouses or dependents are generally not subject to taxation. All graduate level tuition waiver benefits used by a spouse or dependent are subject to taxation.

All taxation will be in accordance with federal and state law.

Quick Reference Table

Person Receiving Benefits

Course Level

Benefit Type

Tax Consequences

Employee

Undergraduate

Tuition Waiver

Non-Taxable

Employee

Undergraduate

Tuition Reimbursement

Amount in Excess of $5,250 is taxable

Employee

Graduate

Tuition Waiver

Amount in Excess of $5,250 is taxable

Employee

Graduate

Tuition Reimbursement

Amount in Excess of $5,250 is taxable

Spouse or Dependent

Undergraduate

Tuition Waiver

Non-Taxable (except for dependents who attain age 24 or older in the same calendar year.)

Spouse or Dependent

Graduate

Tuition Waiver

Subject to taxation

This summary is provided for the convenience of employees; employees should discuss any questions regarding personal income tax issues with their tax advisor or preparer.

Review the educational assistance plan for Minnesota State Colleges and Universities.

Other Tax Topics you may find helpful, from the MnSCU System Office Finance Division. 

Additional information regarding educational assistance plans in general is available from the IRS.