Student Worker Tax Exemptions
It is important for student workers to know that they are not automatically exempt from paying taxes, as their earnings remain subject to federal and state income taxes. However, certain student workers will be exempt from Social Security tax and Medicare tax (FICA taxes) withholding. Half-time undergraduate or graduate students not considered a professional, career, or full-time employee, qualify for the student FICA exemption.
The exemption applies to qualified student wages earned during a term in which the student is enrolled and to students who satisfy the following half-time semester or summer session standards:
6 credit hours per semester
|6 credit hours per semester|
3 credit hours per summer
|3 credit hours per summer|
1 credit hour per dissertation research
If you are in the last semester of a course of study and enrolled in the number of hours required to complete your degree program, you will remain eligible for the FICA exemption.
To be considered a student, an employee’s services must be incident to and for the purpose of pursuing a course of study. This is determined on the basis of the relationship of the employee with the organization for which the services are being performed. The educational aspect of the relationship must be predominant compared to the service aspect.
All post-qualifying Ph.D candidates in TA, GA, or student employee positions who are working on their dissertations (and registered for either Full-Time Matriculation Continued, Full-Time or Part-Time Study On-Campus, or Full-Time or Part-Time Study Off-Campus),will be exempt from FICA tax withholding.* Individuals in this category must submit the FICA Exemption Request Form, signed by the department and student.
The payroll system will review the student’s enrollment continually throughout the year to determine student status. The above criteria will be used and no exceptions will be made for individual students. If a students enrolled credit hours change after the add/drop period in a given term, retroactive FICA tax charges or refunds will not be processed.
*Students in this category holding any FICA-eligible employee position during the calendar year will have all wages subject to FICA withholding.
The student FICA tax exemption applies only to employment during school breaks of five weeks or less. To be exempted, you must be eligible for exemption on the last day of classes in the academic period preceding the break. You must also be eligible to enroll in classes following the break. The last day of classes is the last day of final exams for each semester.
Summer employment will not be exempt from FICA taxes unless you are enrolled/attending class in accordance with the half-time standards for the summer session. Services performed between the fall and spring semesters are generally eligible for the FICA exemption.
The law specifically distinguishes teaching assistant and graduate assistant positions which qualify for the FICA exemption (provided that the above half-time standards are satisfied). The FICA exemption also applies to students enrolled on less than a half-time basis if the student requires less than the above standards to complete the degree program.
The law specifically disqualifies postdoctoral students, postdoctoral fellows, medical residents, and medical intern positions from student FICA exemption eligibility because the services performed are not incident to or for the purpose of pursuing a course of study.
During any semester or summer when a student worker has multiple appointments—at least one of which confers professional, career, or full-time employee status or provides certain employee benefits—FICA taxes will be withheld from all earnings, and no exemption will be allowed. Each semester, all facts and circumstances may be reevaluated to determine the proper FICA tax withholding or exemption.
A professional employee is an employee whose work:
- Requires knowledge of an advanced type in a field of science or learning.
- Necessitates the consistent exercise of discretion and judgment.
- Is predominantly intellectual and varied in character
Services performed by a “professional employee” generally cannot be considered incident to and for the purpose of pursuing a course of study. Therefore, these employees are not eligible for the student FICA exemption.
A full-time employee is ineligible for the student FICA exemption because the services of a full-time employee are not incident to and for the purpose of pursuing a course of study. An employee with a normal work schedule of 40 or more hours per week is always considered a full-time employee.
Services performed by an employee who receives/is eligible to receive employment benefits or participate in retirement plans generally cannot be considered to be incident to and for the purpose of pursuing a course of study.
Internal Revenue Service Notice: http://www.irs.gov/irb/2005-02_IRB/ar16.html
IRS Revenue Procedure: 2005-11, http://www.irs.gov/pub/irs-drop/rp-05-11.pdf
Final Regulations: http://www.irs.gov/pub/irs-regs/td_9167.pdf