Taxation on Employee Fee Waiver Benefit
- The value of fees waived for the eligible employee's use of their own Fee Waiver benefit is non-taxable for undergraduate courses.
- The value of fees waived for the eligible employee's use of their own Fee Waiver benefit for graduate/doctorate classes is nontaxable up to $5,250 per tax/calendar year. The value of fees waived that exceeds $5,250 in a given tax/calendar year will be reported to the State Controller's Office and the additional taxes taken from the employee's pay warrant.
Employees are encouraged to consult with their personal tax advisor to determine if courses taken are job related and include the deduction on their personal tax return, if eligible.
Sample Estimated Employee Imputed Income Taxation
| Term | Calendar Year | Bargaining Unit | College | # units/ classes per term | Cumulaitve Fees Waived per Calendar Year | $5,250 Threshold |
|---|---|---|---|---|---|---|
| Fall | 2019 | CSUEU (2,5,7,9) | CENG | 6 units or less | $2,582 | No |
| New Calendar Year 01/01/2020 - Fee Calculation Reset | ||||||
| Winter | 2020 | CSUEU (2,5,7,9) | CENG | 6 units or less | $2,582 | No |
| Spring | 2020 | CSUEU (2,5,7,9) | CENG | 6 units or less | $5,164 | No |
| Fall | 2020 | CSUEU (2,5,7,9) | CENG | 6 units or less | $7,746 | Yes |
Fees waived calendar year 2020: $7,746
Fees subject to Imputed Income Tax: $7,746 - $5,250 = $2,496
Estimated tax: $2,496 X 36.25% = $904.80
Taxation on Dependent Fee Waiver Benefit
The value of fees waived for all graduate/doctorate level coursework taken by an employee’s spouse, domestic partner or dependent child through this program continues to be reported as taxable income to the employee and the additional tax deductions taken from the employees' pay. All undergraduate level coursework taken by an employee’s domestic partner through this program is taxable as well.
Imputed Tax Rates
Imputed income related to participation in the CSU Employee Fee Waiver & Reduction Program, as outlined above, is subject to specific tax rates as follows:
- Federal 22% (Changed from 25% to 22% effective January 1, 2018--see IRS Notice 1036)
- State of California 6.6%
- Social Security 6.2%
- Medicare 1.45%
- Total Imputed Tax Rate 36.25%
The imputed income is reported to the State Controller's Office once each term. The reporting is done after Census for the term, so there is no adverse tax reporting on imputed income when an employee or an employee’s dependent drops courses.
How much?
Estimated Total Fees Waived or Reduced for Calendar Year
https://afd.calpoly.edu/fees/fee-waiver/
Use appropriate pdf based on bargaining unit. The amount aggregated over the $5,250 threshold is taxable at the flat rate tax amount and will be taxed based on the flat tax rate (currently 36.25%).
PDF Used For SAMPLE:
https://afd.calpoly.edu/fees/docs/ee-unit-2-5-7-9(1819)nc.pdf
References
CSU Technical Letter HR/Benefits 2018-20 pdf
Applicable Internal Revenue Code (IRC) sections:
- Qualified Tuition Reduction under Internal Revenue Code Section 117(d); and
- Educational Assistance Programs under Internal Revenue Code Section 127;
- Working Condition Fringe Benefits under Internal Revenue Code Section 132(d) (for employees to pursue through their personal tax advisor, if applicable).