Educational Assistance

Educational assistance is a financial investment to both the employer and employees. From the employer’s perspective, “Job related educational expenses, may be excluded from employee’s gross income under Section 127 of the Internal Revenue Code or as a “working condition fringe benefit under Code 132.” Providing educational assistance may benefit the employer by keeping employees current on changes in the industry. Most employers reimburse when the class or seminar is directly related to an employee’s job duties primarily due to tax laws. Some work-related educational benefits include the following:

Under a written Section 127 educational assistance program, an employer may exclude up to $5,250 per employee per calendar year from the employee's taxable income (this amount is indexed for inflation for tax years beginning after 2026). This $5,250 annual cap also covers employer payments of principal or interest on an employee's qualified education loans — a benefit that was made a permanent part of Section 127 by recent federal legislation (previously it was set to expire). The loan-repayment benefit and other educational assistance under the same program share the single combined $5,250 annual limit; amounts an employer provides above that limit are taxable to the employee as wages.