Employees of nonprofit educational institutions can receive undergraduate tuition waivers completely tax-free, with no dollar cap at all — a far more generous benefit than most employer education programs.
How it works
An undergraduate-level tuition waiver is fully excludable regardless of amount. A graduate-level waiver is only excludable if the recipient is also a teaching or research assistant for the institution — otherwise the full amount is taxable.
What this does not include
This does not include the separate §127 employer educational assistance exclusion (capped at $5,250/year and available from any employer), which this site’s employer-educational-assistance-exclusion calculator covers — §117(d) is specific to educational institutions waiving their own tuition.
How to use this calculator
- Enter the tuition waived, whether it’s graduate-level, and whether the recipient is a teaching/research assistant.
Frequently asked questions
Does this benefit cover spouses and dependents too?
Yes — the exclusion extends to tuition reductions for an employee’s spouse and dependent children, not just the employee themselves.
Why is there no dollar cap for undergraduate tuition?
Congress designed §117(d) specifically to support the traditional practice of colleges and universities offering free or reduced tuition to their own employees’ families as a workforce benefit.
Must an institution offer this benefit to all employees equally?
Yes — if an institution chooses to offer qualified tuition reduction, it generally cannot discriminate in favor of highly compensated employees; the benefit must be available on a nondiscriminatory basis.
