MINNESOTA STATE COLLEGES AND UNIVERSITIES
Notice of Employer-Provided Educational Assistance
January 2005
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. Additional information regarding educational assistance plans in general is available from the IRS at: http://www.irs.gov/publications/p970/ch11.html. Click here for a copy of the educational assistance plan for the Minnesota State Colleges and Universities.
