The University of Pittsburgh offers tuition remission scholarships to full-time employees, their dependents, and their spouses or domestic partners. The taxability of education credits by degree level and beneficiary are listed in the chart below.
Taxability of Education Benefits
|Undergraduate Level||Graduate Level|
|Employee||Non Taxable||Amount greater than $5250.00 is taxable*|
|Spouse||Non Taxable||Entire amount is taxable*|
|Partner||Entire amount is taxable*||Entire amount is taxable*|
*Taxability applies to Federal Income Tax, Social Security, and Medicare.
Viewing Tax Benefits
The taxation of education benefits is shown on both the student’s University account and the associated employee’s payslip. However, the tax is withheld from the scholarship and reconciled in the employee’s pay.
Student’s Account (PeopleSoft)
The student’s account shows the taxable scholarship amount, the estimated tax withheld, and the net scholarship that is credited to the student’s account. The tax owed is estimated at 29.65% which is the total of 22% Federal, 6.2% Social Security, and 1.45% Medicare. See below example.
|Taxable scholarship||($6250 Scholarship - $5250)||$1000.00|
|Less estimated tax withheld||($1000 Taxable Amount x 29.65%)||-||$ 296.50|
|Net taxable amount posted to account||=||$ 703.50
|Plus non-taxable portion of scholarship||+||$ 5250.00|
|Total scholarship posted to account||=||$ 5953.50|
Payslip (Pitt Worx)
The full taxable portion of the scholarship and the net amount posted to the student’s account are added to the payslip to allow for proper taxation and Form W-2 reporting. Since the scholarship is taxed at the employee’s actual tax rate, which is based on Form W-4 and Social Security status, most employees will receive a refund in their net pay. See below example.
|Taxable scholarship added to gross pay on payslip||$1000.00|
|Less actual tax calculated at employee’s current tax rate||-||$ 200.00|
|Less net taxable scholarship posted to student account||-||$ 703.50|
|Equals refund in employee’s net pay||=||$ 96.50*|
*The amount of taxation will vary based on the employee’s current tax rate and the amount of the taxable scholarship. It is possible that a large scholarship amount may cause a change in your federal income tax percentage rate. For more information, please review IRS Publication 15.