Education

Whether a tuition benefit is taxable depends on several factors.

According to IRS Publication 970 at this link, you may not have to pay tax on a "Qualified Tuition Reduction" If you are allowed to study tuition-free or for a reduced rate.  You don't have to include a qualified tuition reduction in your income.  A tuition reduction is qualified only if you receive it from, and use it at, an eligible educational institution. The rules for determining if a tuition reduction is qualified, and therefore tax free, are different if the education provided is below the graduate level or is graduate education.

If you receive a tuition reduction for education below the graduate level (including primary, secondary, or high school), it is a qualified tuition reduction, and therefore tax free, only if your relationship to the educational institution providing the benefit is described below.

1. You are an employee of the eligible educational institution.

2. You were an employee of the eligible educational institution, but you retired or left on disability.

3. You are a widow or widower of an individual who died while an employee of the eligible educational institution or who retired or left on disability.

4. You are the dependent child or spouse of an individual described in (1) through (3) above.

For purposes of the qualified tuition reduction, a child is a dependent child if the child is under age 25 and both parents have died.

A tuition reduction you receive for graduate education is qualified, and therefore tax free, if both of the following requirements are met.

• It is provided by an eligible educational institution.

• You are a graduate student who performs teaching or research activities for the educational institution.

You must include in income any other tuition reductions for graduate education that you receive.