The Big Beautiful Bill raises MIT’s endowment tax rate from 1.4% to 8%
The tax hike will cost MIT around 10% of its annual central budget
Colin Clark–The Tech
On July 3, Congress passed the H.R.1 bill, commonly referred to as the One Big Beautiful Bill, a spending and tax policy that will raise MIT’s endowment tax rate from 1.4% to 8%. The House originally proposed a rate of 21%. According to the bill, universities with endowments between $750,000 and $2 million per student will be taxed at a rate of 4%, while endowments exceeding $2 million per student will be taxed at a rate of 8%. Peer institutions that fall under the latter rate include Harvard and Yale. In 2024, the Institute had an endowment per student of around $2.6 million.
The endowment tax rate increase is one of the many methods that the Trump administration has used to pressure elite universities. Chairman of the House Ways and Means Committee Jason Smith (R-Miss.) stated that the higher tax rate will hold “woke, elite universities” accountable by preventing them from “abus[ing] generous benefits provided through the tax code.” Administrators and professors in higher education have criticized the endowment tax rate increase for being punitive and having a significant impact on financial operations.
In a letter to the MIT community on July 10, Provost Anantha Chandrakasan and Executive Vice President and Treasurer (EPVT) Glen Shor stated that the 8% tax rate would result in costs that are about 10% of the Institute’s annual central budget. Besides the tax hike, Chandrakasan and Shor expressed concern about future cuts that could impact the Institute’s budget, including a cap on the indirect cost rate for research funding and research grant freezes. Currently, federal agencies such as the NIH and NSF have proposed an indirect cost cap rate of 15%, though they have been blocked and are currently pending before the courts.
According to the Understanding MIT website, the endowment consists of more than 4,500 individual funds, which are used to support research, education, and financial aid. The endowment allows the Institute to provide free tuition for undergraduates with family incomes below $200,000, and attendance at no cost for family incomes below $100,000. EVPT Office Communications Director Jennifer Burke stated that the increase in the endowment tax rate will not affect MIT’s free tuition plan.
Currently, the Financial Scenarios Working Group is planning for further measures that are necessary for addressing new budget constraints. More details about MIT’s financial plan will be released in the fall.
A correction was made on July 22, 2025: A previous version of the article misstated the Institute endowment per student incorrectly. The calculation is based on the total non-exempt assets per student, which include the endowment and other investments and assets. The endowment per student is approximately $2.6 milllion per student, not $2.07 million per student.