Suppose your employer cuts your wages and instead pays your rent. A rent waiver, so to speak. You would have to pay income taxes on the value of the rent, even though you never touched the rent money.Maybe you donu2019t like the first example because money is still changing hands. Suppose you shot a commercial for Toyota and Toyota is compensating you with a free car. That transaction didnu2019t u201ccostu201d them any money - they are giving you something thatu2019s already theirs. However, you are still liable for income taxes on the value of the car.The American income tax system generally assesses taxes on the worth of non-monetary benefits we receive, except where explicitly exempted from taxation. Tuition waivers enjoy one such exemption.Instead of giving you a tuition waiver, the university could give you cash and you could use it to pay your tuition. That would create taxable income, and the end result is the same as just giving you a tuition waiver upfront. Hence, itu2019s easy to see how tuition waivers may get taxed.