Tuition Tax Liability Policy for Jr. Faculty
Please read the following Johns Hopkins University policy on taxation of tuition benefits,which states that any form of tuition payment which comes from the University will be considered a tuition benefit, and such benefits may be taxable (see below). The official policy is available on the JHU tax website.
Tuition Provided by Departments to Employees for Graduate Studies
Overview – Tuition is generally provided for employees under University benefit programs. Tuition provided under a benefit program qualifies for IRS tax exemptions up to a maximum of $5250 per calendar year. In addition, there are occasions when departments provide tuition for employees. Tuition payments or scholarships provided by departments do not qualify for IRS tax exemptions and are fully taxable to the employee – see below.
University benefit programs – amounts paid under these programs are subject to the Hopkins plan limits and qualify for IRS tax exemptions:
- Tuition Remission – pays for full-time JHU faculty and staff, and their spouses and dependent children for tuition remission for part-time undergraduate and graduate studies through the University’s schools and recorded through the student information system.
- Tuition Grant – pays for full-time undergraduate studies of dependent children of full-time benefits eligible faculty and staff at qualifying institutions of higher education. Payments are made directly to the institution, not the employee.
- Tuition Reimbursement for Bargaining Unit Employees - reimburses eligible bargaining unit employees for the academic credit and non-credit courses (not offered by JHU).
- Tuition Reimbursement for Faculty and Staff in Outlying Areas – reimburses eligible full-time JHU faculty and staff for part-time studies for coursed not taken at Hopkins due to the employee’s work location.
- Tuition Reimbursement Plan for Part-time Undergraduate Education for Faculty and Staff – reimburses eligible full-time JHU faculty and staff for part-time studies for courses not offered at Hopkins.
For more information about these plans go to http://hrnt.jhu.edu/benefits/EduBenefits/home.cfm .
Payments from departments or from external grants, including K-awards- Tuition support provided by departments or from sponsored project funds do not qualify for IRS tax exemptions and are fully taxable to the employee:
- Departmental or grant aid – recorded like a scholarship through the student information system; these amounts are generally provided for graduate courses. The amounts are fully taxable regardless of the source of the funds, and even include NIH K-awards. The tuition payments or credits are not subject to the IRS exclusion limit of $5250. The amount is added to the employee’s taxable compensation in payroll and taxes are withheld. Since this is a non-cash payroll adjustment, the employee’s net pay is decreased by the amount of the taxes withheld.
The tax impact to employees for non-cash payroll adjustments: Generally, employees will be taxed in the quarter following the transaction posting to the student information system. To lessen the impact the amount is spread over 5 semi-monthly pay periodsexcept for the final quarter, see below. The additional tax will be deducted directly from paychecks, reducing net pay.
- Departmental aid or grant charges posted to the student accounts between January 1 and March 31 will result in tax withholdings beginning April 30 through June 30
- Departmental Aid posted between April 1 and June 30 will result in tax withholdings beginning July 31 through September 30.
- Departmental aid between July 1 and September 30 will result in tax withholdings beginning October 30 through December 31.
- Departmental aid posted between October 1 and December 31 be directly adjusted as of December 31 and reflected on the W-2 for that calendar year. Employees must be aware of this as federal tax withheld adjusted and used to cover the FICA taxes (Social Security and Medicare, 7.65%). Employee may need to increase taxes withheld during the year in anticipation or file an estimated tax payment.
- Tuition paid to reimburse employees – tuition reimbursements by departments to employees are fully taxable and should be paid through payroll as a supplement. Taxes are withheld from the payment. Contact payroll for the wage type to use on the ISR.
- Tuition paid on behalf of an employee – tuition paid by departments or external grants to an institution for employees’ coursework is fully taxable to the employee. While this is paid through Accounts Payable, the amount is added to the employee’s taxable compensation in payroll and taxes are withheld. Since this is a non-cash payroll adjustment, the employee’s net pay is decreased by the amount of the taxes withheld.
The tax impact to employees for non-cash payroll adjustments: Generally, employees will be taxed on the full amount in one pay period depending on the amount of the payment. The additional tax will be deducted directly from paychecks, reducing net pay.
EXAMPLE PROVIDED TO ILLUSTRATE THIS POLICY: Faculty Not Eligible for Tuition Remission
A 1st year PhD or MHS student who is a Jr. Faculty member who is registered as a full-time studentin the GTPCI program is not eligible for tuition remission. An MHS student must register for a minimum of 12 credits/term. A PhD student must register for a minimum of 16 credits/term. Tuition is $923/credit up to 12 credits. Example:
1st term = $11076 – this amount is taxable income. It is divided over 5 pay periods therefore you will be taxed on $2215.20 of additional income over the next 5 pay periods (see dates in policy above)
2nd term = $11076 – this amount is taxable income. It is divided over 5 pay periods therefore you will be taxed on $2215.20 of additional income over the next 5 pay periods
NEW TAX YEAR
3rd term = $11076 – this amount is taxable income. It is divided over 5 pay periods therefore you will be taxed on $2215.20 of additional income over the next 5 pay periods
4th term = $11076 – this amount is taxable income. It is divided over 5 pay periods therefore you will be taxed on $2215.20 of additional income over the next 5 pay periods
** See Appendix A
EXAMPLES PROVIDED TO ILLUSTRATE THIS POLICY: Faculty Eligible for Tuition Remission
All Jr. Faculty who register as part-time students are eligible for Tuition Remission. As determined by the IRS, $5250 is the maximum tuition benefit an employer is allowed to contribute to tax-free tuition for an employee. Any other tuition benefit above $5250, such as scholarship support, regardless of its source, is considered taxable income by the Federal Government.
University Description of Tuition Remission:
Full-time faculty, and staff members and their family members (to include same-sex domestic partners) are eligible to participate in the Tuition Remission Plan after 90 days of consecutive full-time
employment with JHU. The 90day waiting period is waived for professional development
computer training courses. It can also be waived for other courses for full-time faculty members if
the supervisor or department head certifies that the course is a requirement of the job. The plan is
limited to part-time studies and covers tuition costs of the courses offered by JHU’s academic
divisions. The maximum amount available to support staff for the calendar year is $5250 for the family and within that amount $2625 for dependents. Employees are eligible for 100% remission for both credit (up to a family total of $5250 per calendar year) and non-credit professional development courses (for which there is no dollar limit), and 80% remission for eligible, non-credit personal enrichment courses. The specific amount available to dependents on a per course/term/quarter varies by academic division, but in general ranges from $50 to 50%, up to $2625 per year for credit courses.
New and continuing part-time students who are faculty will be taxed at the end of each academic term if the amount of tuition benefits exceeds $5250. The additional tax will be deducted directly from paychecks. Tuition remission payments over $5250 between January 1 and March 31 will result in tax withholdings beginning April 30 through June 30. Tuition remission payments over $5250 between April 1 and June 30 will result in tax withholdings beginning July 31 through September 30. Tuition remission payments over $5250 between July 1 and September 30 will result in tax withholdings beginning October 30 through December 31. Tuition remission payments over $5250 between October 1 and December 31 be directly adjusted as of December 31 and reflected on the W-2 for that calendar year.
- A continuing PhD student is promoted to faculty. The student must register for a minimum of 3 credits per term($923/credit) and plans to take no additional coursework.
NEW TAX YEAR
3rd term =$2769- tuition is covered by tuition remission
4th term =$2769- The limit of tuition benefits of $5250 is reached. The remaining $288 is covered by the graduate program but is taxable income
1stterm =$2769- $2769 is covered by the graduate program but is taxable income
2nd term =$2769 - $2769is covered by the graduate program but is taxable income
- A PhD student is promoted to faculty the July before his/her second year. Second year students are required to take 5 additional courses.
Second year
1st term = $2769 for Design of Clinical Experiments - tuition is covered by tuition remission
2nd term = $2769 for a 3 credit course - The limit of tuition benefits of $5250 is reached. The remaining $288 is covered by the graduate program but is taxable income
END OF TAX YEAR
3rd term = $5538 for Two 3 credit courses – The limit of tuition benefits of $5250 is reached. The remaining $288 is covered by the graduate program but is taxable income
4th term = $2769 for a 3 credit course - $2769 is covered by the graduate program but is taxable income
Third year
1st term = $2769 for 3 credits thesis research - $2769 is covered by the graduate program butis taxable income
2nd term = $2769 for 3 credits thesis research - $2769 is covered by the graduate program butis taxable income
END OF TAX YEAR
- A faculty member is in the MHS program part-time (faculty members in the full-time program are not eligible for tuition remission). The tuition cost is covered by tuition remission and any other source of support (including K-awards). Tuition is based on 9 credits/termfor this example, but would increase by $923/credit for each additional credit up to 12 credits. The MHS program is 70 credits total.
First year
1st term =$8307- The limit of tuition benefits of $5250 is reached. The remaining $3057 is covered by the graduate program butis taxable income
2nd term = $8307 - $8307 is covered by the graduate program butis taxable income
END OF TAX YEAR
3rd term = $8307- The limit of tuition benefits of $5250 is reached. The remaining $3057 is covered by the graduate program butis taxable income
4th term = $8307 - $8307 is covered by the graduate program butis taxable income
Second year
1st term = $8307 - $8307 is covered by the graduate program butis taxable income
2nd term = $8307 - $8307 is covered by the graduate program butis taxable income
END OF TAX YEAR
3rd term = $8307 - The limit of tuition benefits of $5250 is reached. The remaining $3057 is covered by the graduate program butis taxable income
4th term = $8307 - $8307 is covered by the graduate program butis taxable income
** See Appendix A
For further questions, you may contact the Tax Office at http://www.controller.jhu.edu/depts/tax/index.html.
Appendix AMHS Program Assumptions for the Graduate Training Programs in Clinical Investigation
1 yr program / 2 yr program
full time / part time
70 credits / 72 credits
$923/credit / $923/credit
$42816 / $64224
all departmental tuition aid taxable at highest tax rate for tax bracket
Calendar Year One / Calendar Year Two / Calendar Year Three / Total
2 YR PROGRAM / 1st Term / 2nd Term / 3rd Term / 4th Term / 1st Term / 2nd Term / 3rd Term / 4th Term
Credits / 9 / 9 / 9 / 9 / 9 / 9 / 9 / 9 / 72
Tuition Cost / 8307.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / $66456.00
Tuition Remission / 5250.00 / - / 5250.00 / - / - / - / 5250.00 / - / $15750.00
Tuition Benefit / 3057.00 / 8307.00 / 3057.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / 8307.00 / $55956.00
Tax Calculation / 15% bracket / 458.55 / 1246.05 / 458.55 / 1246.05 / 1246.05 / 1246.05 / 458.55 / 1246.05 / $7605.90
25% bracket / 764.25 / 2076.75 / 764.25 / 2076.75 / 2076.75 / 2076.75 / 764.25 / 2076.75 / $12676.50
28% bracket / 855.96 / 2325.96 / 855.96 / 2325.96 / 2325.96 / 2325.96 / 855.96 / 2325.96 / $14197.68
1 YR PROGRAM / 1st Term / 2nd Term / 3rd Term / 4th Term / Total
Credits / 17.5 / 17.5 / 17.5 / 17.5 / 70
Tuition Cost / 11076.00 / 11076.00 / 11076.00 / 11076.00 / $44304.00
Tuition Remission / - / - / - / -
Tuition Benefit / 11076.00 / 11076.00 / 11076.00 / 11076.00 / $44304.00
Tax Calculation / 15% bracket* / 1661.40 / 1661.40 / 1661.40 / 1661.40 / $6645.60
25% bracket** / 2769.00 / 2769.00 / 2769.00 / 2769.00 / $11076.00
28% bracket*** / 3101.28 / 3101.28 / 3101.28 / 3101.28 / $12405.12
*For Married with spouse and 2 children, stnd deduction ($10,900), AGI $40,950 to $90,000;; if Single w/o dependents, AGI $16,975 to $41,500
**For Married with spouse and 2 children, stnd deduction ($10,900), AGI $90,000 to $156,350; if Single w/o dependents, AGI $41,500 to $87,800
***For Married with spouse and 2 children, stnd deduction ($10,900), AGI $156,350 to $225,200; if Single w/o dependents, AGI $87,800 to $173,500