Endowment excise tax
Learn how the new 4% federal tax on endowment earnings affects WashU’s budget, and why endowed giving continues to have a powerful impact.
What the higher excise tax means for WashU
More expensive tax bill …
Beginning July 1, 2026 — the start of the new fiscal year — WashU’s realized earned investment income will be taxed at 4% instead of 1.4%.
It means we go from paying approximately $20 million annually in taxes on our endowment income to roughly $57 million. That’s an increase of about $37 million, the equivalent of almost 20 full-tuition, four-year undergraduate scholarships.
Endowed gifts are still a good investment …
still goes to WashU
Zooming in on one endowed professorship
Even with the tax increase, 96% of your investment income will still go directly to the university.
Let’s say the entire WashU endowment is $1 million and includes one endowed professorship. In the last year,
the net income was $100,000, and 100% of the net income is considered realized.
Four percent of $100,000 is $4,000, so the university would pay $4,000 to the government for taxes on the endowment. WashU would now have $1,096,000 in the endowment.
It would then provide a yearly payout from the new baseline of the endowment. If that rate was, for example, 4%, the payout to support the endowed professorship would be 4% of $1,096,000, which is $43,840 that year.
That payout supports real people and programs today — while the remaining income is reinvested to keep the endowed professorship strong for generations.
Graphic history of the endowment excise tax
The federal government started taxing university endowments beginning in January 2018.