Taxes & Tuition Remission for GRAs
The tuition coverage that graduate research assistants (GRAs) receive by virtue of their appointment is treated as taxable income, regardless of funding source of the sponsored project. The uniformity of application of funding source (i.e., not only funds that are federal in nature, but also industrial grants for example), may be reviewed here.
The University collects this money for the IRS. At approximately the middle of each semester that the GRAs appointment is held, the student will receive a tax bill that is due within 10 days in order to avoid a financial bar. Interest does not accrue if the bill is not paid, but a major consequence of the bar is that the student cannot register for classes the following semester. If it's the student's graduating semester, the student may not graduate until the bill is paid.
A majority of students are taxed at 15%-17%. Using this model in a 2011-2012 long semester, based on $4,616/semester of resident tuition in the College of Engineering, you should expect a bill of approximately $725 in long semesters, or approximately $250 in summers.
Tuition Assistance is also considered taxable income since you are performing duties for the tuition coverage. It does NOT cover 100% of tuition (it covers approximately 85%). In 2012-2013, for a 20 hr/wk TA, the total is $4,000/long semester ($1,500 in summers) and it is paid out in two installments.
When your TA appointment is created by the department – which is normally only right before the semester begins – 75% of this amount is applied to reduce your tuition bill. 25% is withheld for 2 - 4 weeks to calculate the taxes that you owe on the Tuition Assistance. The amount not withheld for taxes is electronically deposited into your bank account. If you have taken the Tuition Loan, it is expected that you use this refunded amount to help you pay your tuition loan. You are responsible for any balance on your fee bill by the 4th class day. Like that for GRAs, you should claim educational tax credits to receive your refund.
Sample tuition bill for Fall 2012
Non-residents & international students must first claim their tuition waiver.
|Total - Assistance = Amount Due||Explanation of equation|
|$4782||9 hours resident tuition in Engineering|
||75% of Tuition Assistance (100% is $4,000)
|$1,782||Initial responsibility, which must be paid by the 4thclass day|
TA tax liability for tuition support:
TAs: 25% of your tuition support will be withheld upfront. This means that you will see a larger balance on your tuition bill. It is your responsibility to pay this balance either by a tuition loan or through personal funds. The amount that is not refunded to you is your tax liability. You will be able to claim that on your taxes as explained below.
Offer students see below.
First-year offer students: If you are a TA in your first year, the department covers what university Tuition Assistance does not: $782 ($4782-$4,000). This $782 is also considered taxable income since duties are required. If you are a TA AFTER your first year, the department does not pick up the difference. Your offer letter provides the dates of the offer's guarantee, which is generally a student's first 2 long semesters.
US Citizens & Permanent Residents
These students are refunded most of the money by taking advantage of education tax credits (namely the Hope tax credit and Lifetime Learning tax credit) when they file their federal tax returns. The Lifetime Learning credit is 20% of the tuition amount. In principle, students may come out ahead because typically their tax rate is less than 20% (see pages 7-9 and 11 of aforementioned PDF presentation).
Taxes that are withheld from tuition payments appear on your federal form 1098-T. You can view it online once it's been calculated and prepared by January 31st. You report this information on IRS Form 8863. Your wages are reported on your W2.
To have an idea of your tax rate, see federal withholding tax rates on UT Payroll's website.
The purchase of textbooks is also a qualified education expense.
F-1 Visa Holders (most international students)
International students must create a record on GLACIER to calculate their taxes.
These students are not entitled to education credits. Please consult the International Office for details about your tax credit eligibility, e.g., you have a child. You also might be eligible for an exemption if your country has a tax treaty with the United States.
You do not receive the 1098-T form, nor do you use Form 8863. However, resident aliens do report their incomes for tax purposes if they've lived in the United States for at least 5 years.Non-resident aliens are typically taxed at a rate of 14%.