You pay federal taxes on the value of the tuition benefit for both undergraduate and graduate tuition for your domestic partner. The dollar value of the tuition reduction is reported to your employing university, and taxes are withheld based on this "imputed income". You do not see the tuition reduction as a pay increase on your check; the tax withholding for the value of the benefit is all that is shown. State and federal taxes, plus Social Security withholding is withheld on the value of the benefit.
