Programs Facilitating Employee Educational
Assistance on a Tax-Free Basis

Employers are able to provide employees with real and meaningful support through educational assistance programs with a tax exemption. These programs help employees by reducing their education costs and student loan debt. They also help companies attract and keep workers.

Qualifying Expenses

Educational assistance programs may include payments for:

Books – Required textbooks and reference course materials that are crucial for course completion.

Equipment – Course pertinent equipment that aids in the achievement of educational objectives.

Supplies – Educational materials such as lab, calculators or other educational aids.

Tuition and fees – Payment to the educational institution for enrollment and actual teaching.

Qualified education loans – Principally along with certain interest meeting the IRS standards.

Loan payments – Payments which decrease the total outstanding balances on qualifying student loans.

Effective Date

Benefits that are associated with educational assistance from the employer covers payments made from March 27, 2020, to January 1, 2026. Payments such as the principal or interest of any qualified education loan which the employee incurs in the course of a qualifying education.

For flexibility in distributing benefits, payments may be made in any of the following ways:

Direct payment to the educational provider (colleges, universities, trade schools, etc.)
Direct payment to the lender of the employee’s student loan
Direct payment to the employee in the form of cost reimbursement associated with the qualified expenses
Employers can design any of the reimbursement programs to satisfy organizational goals and employee needs because of this flexibility.
This flexibility allows employers to design programs that support both their business goals and the needs of their employees.
The maximum limit of educational assistance benefits which can be provided without any tax for an employee in a year is $5250.
Any dollar above this limit is regarded to be a part of the employee’s income which is taxable as gross wages.
The $5250 annual limit will be adjusted for cost-of-living increases for the following years which will commence in 2026. This allowance will ensure that the limit is relevant with the conditions of the year.

Employers and employees may refer to the following for additional clarification:

IRS Publication 15-B – Employer’s Tax Guide to Fringe Benefits.

IRS Publication 970, Chapter 10 – Tax Benefits for Education which outlines some of the basic qualified student loan assistance programs.

Not every expense is tax deductible. They are referred to as the ineligible expenses which are:

Any expenses associated with meals, cost of lodging, and transport expenses

Tools or supplies ( Other than text books) that a student can keep after the course, for example, a personal computer which is not a requirement for the course and, in some cases, is demanded by the educational institution.

Education or Employee’s Spouse or dependent.

Courses in sports, games, or hobbies, unless:

The Course is part of the employer’s sponsored Degree Completion Program or have a reasonable relationship to the employer’s business.

Employer Take Away

Corporate strategies put in place to aid employees in pursuing education remains a tactical approach to enhancing the business’s return on investment. The employer will:

Reduce the financial burden of the employees

Foster employee commitment and retention

Create a beneficial value proposition to attract high skilled talent in the market

Encourage further advancement of career growth

The bottom line of these strategies is a mutually beneficial approach. Employees are provided with financial and career advancement aid, while employers gain an increase in engagement, commitment, and skill in the workforce.

Connect with SAI CPA Services — Tax Preparation

For help coordinating employer educational assistance with your personal or business tax filings, connect with SAI CPA Services:
Tax Preparation for Individuals & Businesses — SAI CPA Services.

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SAI CPA Services offers expert tax, accounting, and financial solutions with 25+ years of experience. We ensure accuracy, compliance, and growth.

Programs Facilitating Employee Educational
Assistance on a Tax-Free Basis

Qualifying Expenses

Educational assistance programs may include payments for:

Effective Date

For flexibility in distributing benefits, payments may be made in any of the following ways:

Employers and employees may refer to the following for additional clarification:

Employer Take Away

Connect with SAI CPA Services — Tax Preparation

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About Us

Our Services

Career

Privacy Policy

Head Office

GET IN TOUCH

Programs Facilitating Employee Educational Assistance on a Tax-Free Basis

Qualifying Expenses

Educational assistance programs may include payments for:

Effective Date

For flexibility in distributing benefits, payments may be made in any of the following ways:

Employers and employees may refer to the following for additional clarification:

Employer Take Away

Connect with SAI CPA Services — Tax Preparation

Quick Links

Head Office

Branch Office

GET IN TOUCH

Quick Links

Head Office

GET IN TOUCH

Programs Facilitating Employee Educational
Assistance on a Tax-Free Basis