Tuition assistance tax exemption extended


On August 20, President Clinton signed legislation to extend the tax code provision which excluded some tuition-assistance reimbursements from federal taxes. Section 127 allowed MIT to provide nontaxable reimbursement to Institute employees to pay for:

  • Fees, such as application, registration, library, laboratory, examination and graduation fees.
  • Tuition for graduate courses (that are not taken as part of an undergraduate degree program).
  • Tuition for private study.

The legislation retroactively reinstates the exemption to January 1995 and extends it through June 1996 for graduate-level tuition and related fees, and through May 1997 for private-study tuition and non-graduate fees. Reimbursements for these types of study continue to be subject to Massachusetts state income tax. Employees who will be doing graduate study under the Tuition Assistance program should take into consideration that graduate-level courses begun after June 30, 1996 will be fully taxable.

The following reimbursements continue to be nontaxable for both federal and Massachusetts purposes regardless of the status of Section 127:

  • Tuition at educational organizations (for undergraduate study).
  • Tuition and related fees for IRS-defined job-related study.

For employees paid by the campus Payroll Office, tax withholding has been stopped for reimbursements affected by the Section 127 extension. Contact the campus Payroll Office at x3-2772 for questions about tax withholding. Questions about tax withholding at Lincoln Laboratory should be addressed to the Lincoln Fiscal office at x2343.

Refunds will be issued for taxes withheld before the retroactive extension. If you have other questions about the program and are on campus send e-mail to the Tuition Assistance administrator at or call x3-0497. Lincoln employees should call x7072.

A version of this article appeared in MIT Tech Talk on August 28, 1996.


Topics: Administration

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