The IRS has released updated guidance on educational assistance programs, and if you are a business owner, you’ll want to take note. This could be a great opportunity to support employees while benefiting from tax savings.
Under an employer’s educational assistance program, you can offer up to $5,250 per year in education benefits to employees. The best part? This amount is completely tax-free for both the employer and the employee. It doesn’t count as taxable income for the worker, and you can deduct these expenses, making it a smart financial move.
This program covers a wide range of educational expenses, including tuition, books, supplies, and fees. Additionally, for a limited time, it also applies to student loan repayments—but only for payments made between March 27, 2020, and January 1, 2026. Unless Congress extends this provision, employers looking to take advantage should act now.
One thing to keep in mind is that any tax-free education benefits can’t be used for other tax credits like the Lifetime Learning Credit. However, the overall savings from this program often outweigh any potential tax credits employees might miss out on.
For business owners, this is more than just a tax break—it’s a powerful tool for attracting and retaining top talent. Providing education benefits shows employees that you’re invested in their growth, and it can give your company an edge in today’s competitive job market.
If you’re not already offering an educational assistance program, you may want to consider it now. Not only does it help employees increase their skills, but it also provides a financial advantage for your business. Talk to a tax professional to see how you can implement this program and start maximizing its benefits today.
