Is tuition reimbursement considered taxable, earned income?

Question

I am a student paying tuition to attend a University. I worked in a lab, so I received a "reimbursement" on my tuition (that is how the University denoted the compensation). Does this "reimbursement" count as income, i.e. do I need to include it in taxes that I pay? Also, can I use this "reimbursement" towards my Roth IRA?

Answer 1

For the first part of your question, the relevant IRS Publications are:

• IRS Pub 15-B: Tuition Reduction, Working Condition Benefit
• IRS Pub 970: Employer-Provided Educational Assistance

Essentially, an employer can reimburse you for tuition, and, under certain conditions, this will not be included as taxable income for you. The annual limit is normally $5,250 for this exclusion; however, as a researcher at the University, they might consider this a Working Condition Benefit, which allows them to exclude even more income for you. Any amount that is taxable should be on your W-2 that you'll get next January. If you need to know for sure before then, you'll need to ask your Human Resources representative.

For the second part of your question, concerning Roth IRA, the Pub to read is:

• IRS Pub 590: Can You Contribute to a Roth IRA?

In order to contribute to a Roth IRA, you need earned, taxable income. If your only income for the year is from the University, then you will only be able to contribute the amount that was considered taxable income for you. If all of your pay was in the form of tuition reimbursement that was excluded from your W-2, then you won't be able to contribute to a Roth IRA. However, if you do have some W-2 income from the University, or you have some income from another job, you can contribute that income to a Roth IRA, subject to the rest of the contribution rules.