Employees' Tuition Exemption Tax Withholding

Under the University of Washington’s Internal Revenue Code section 127 tax plan, an employee taking graduate level, non job-related classes is entitled to a tuition waiver of up to $5,250 in a year without tax witholding. Amounts of tuition waiver in excess of the limit are subject to a 25% federal income tax, plus 7.65% for Social Security and Medicare Tax. No tax is withheld for graduate level job-related classes or any undergraduate level classes.

Student Fiscal Services (SFS) monitors tuition waiver status for employees through the information submitted to the Registrar’s office by the employee each quarter. The tuition waiver is calculated three times a year, during Spring, Summer and Autumn quarters, to determine if any employees have exceeded the tuition waiver limit of $5,250 during quarters that they were enrolled in classes.

A report listing any employees who have exceeded the limit is prepared for the Payroll office for tax withholding purposes. Spring quarter tax information is sent to the payroll office by June 10. Summer quarter tax information is sent to the Payroll office by August 1st and Autumn quarter tax information by November 1st of each year. The Payroll schedule for tax withholding is as follows:

  • June 25 and July 10 paydates for Spring quarter
  • August 25th and September 10th paydates for Summer quarter
  • November 10th and 25th paydates for Autumn quarter

Note: Under rules for withholding, the UW withholds income taxes from the balance of your wages at the 25% withholding rate on the amount of the tuition waiver, less the $5250. Payroll taxes are withheld at the rate of 7.65% on any amount exceeding the $5250.

Employees taking graduate level classes may change their class from non job-related to job-related and vice-versa during the first seven days of the current quarter. No changes can be made for prior quarters, or after the 7th day of the current quarter. To update your class status, contact the Registration office in Schmitz Hall, room 225.

In Spring, Summer and Autumn quarter of each year, Student Fiscal Services sends out an email notice to employees who will be taxed for tuition waivers in excess of the $5,250 limit.

For more information regarding tuition exemption, view the UW Administrative Policy Statement 22.1

If you have questions regarding the taxability of your tuition waiver, please email taxquest@u.washington.edu or call 206-221-2621 for assistance.

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