The federal government requires the University to withhold state and federal income taxes on all salary paid to graduate students. (Fellowships are an exception and stipends from fellowships are not assessed state and federal income tax.) FICA and Medicare taxes are not withheld if a graduate student is registered at least half-time in the semester of the payment. Half-time is defined as a minimum of 5 graduate credits in fall and spring and 3 graduate credits in summer. Payroll taxes are not withheld or charged on the value of a tuition scholarship. Payroll taxes are charged if a graduate student's payroll classification is as a tuition assistant.

Graduate students who are less than half-time or any graduate student paid during a time when not attending classes (except winter session and spring break) are subject to all payroll taxes, including FICA and Medicare.