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Tax Exemption for Graduate Tuition Benefit to Expire

November 16, 2010, Volume 57, No. 12

If you are currently enrolled in or are considering enrolling in a graduate program at Penn, we want to make you aware of the pending expiration of the tax exemption currently offered under IRS Code, Section 127. Keep in mind that Penn’s tuition benefit for faculty and staff is not changing. You’ll still receive the exact same benefit as you did before. However, the expiration of the tax exemption will affect the taxability of your tuition benefit. This exemption allows faculty and staff to receive up to $5,250 in tax-free graduate tuition benefits each calendar year.

The exemption is set to expire on December 31, 2010. Unless Congress renews the exemption, your 2011 tuition benefit will be considered taxable income from the first dollar. Because Congress has not indicated whether the exemption will be renewed, the Tuition Benefit Office will treat your entire Spring 2011 benefit as taxable income. Please be prepared for the additional balance on your student account due to withholding from the elimination of the $5,250 exemption. We’re making you aware of this now so you have time to consider how it will affect you well in advance of the Course Selection Period deadline for spring term. If Congress renews the exemption after you have paid your spring term bill, we’ll adjust your withholding calculations and reimburse your student account.

Please understand that this is a federal regulation and not a change in Penn policy. For more information on the graduate tuition benefit, visit the Human Resources website at www.hr.upenn.edu/benefits/tuition/FAQGraduateTuitionTax.aspx.

—Division of Human Resources



Almanac - November 16, 2010, Volume 57, No. 12