Policies and Procedures
Taxability of Tuition and Fee Waivers Associated with Assistantship and Fellowship Appointments
February 2003
Current tax law exempts Teaching Assistants (TAs), Research Assistants (RAs), and most Fellows from having to pay taxes on tuition, service fee, and health service fee waivers associated with these appointments. As of January 1, 2003, some students holding Graduate Assistantships (GAs) or Pre-Professional Graduate Assistantships (PGAs) may be required to pay taxes on tuition and fee waivers that exceed a value of $5,250.
Under the University's Educational Assistance Plan that is in compliance with Internal Revenue Code Section 127, $5,250 per calendar year in tuition and fee waivers associated with GA and/or PGA appointments is excluded from taxable income. Under other Sections of the Internal Revenue Code, GA and PGA tuition and fee waivers exceeding $5,250 per calendar year may be excluded from taxable income if the GA or PGA appointment meets certain criteria.
Each semester GAs and PGAs whose tuition and fee waivers to date are valued at more than $5,250 will receive a notice that includes a "Declaration of Tax Exempt Status for Graduate Student Assistants' Tuition and Service Fee Waivers." The notice and form will come from the Office of the Assistant Vice President for Business and Finance. It is very important that all GAs and PGAs who receive the form complete it and return it to the Payroll Office. Taxes will be withheld for students who are required to fill out this form and do not do so.
A student who holds a GA or PGA appointment will not have to pay tax on the associated tuition, service fee, and health service fee waiver if:
- The tuition waiver does not exceed $5,250 for the calendar year, or
- The student has a joint appointment, of which at least 50% comes from an RA or TA appointment, or
- The student has a concurrent qualified fellowship appointment, or
- The GA or PGA appointment includes a significant amount of teaching or research so that at least half of the student's total assistantship duties are in teaching or research, or
- The student's educational program of study does not "qualify you for a new trade of business."
Students who have a GA or PGA appointment that requires completion of the declaration form should complete the document very carefully. In doing so, it is important to review the explanatory notes about the scope of teaching and research responsibilities that pertain to the taxability issue for these appointments and about what is meant by qualifying for a new trade or business. Students should direct their questions to the Payroll Office, (217) 333-9131 or 100A North Henry Administration Building, 506 South Wright Street, Urbana.
Responsibility for completing the declaration form lies with the student holding the appointment and not with the University. Failure by any GA or PGA to complete and return the form will result in taxes being withheld.
