Educational assistance from your employer

When it comes to paying for education, we tend to focus on the usual suspects: student loans; scholarships, grants and scholarships; and savings accounts. There are, however, a surprising number of options available, including educational assistance programs offered by employers.

To help defray the cost of education – and perhaps make you a more valuable employee – some employers are offering to pay certain graduation fees, or just get credits, using a program. aid to education. Education assistance programs are the equivalent of free money offered by employers and are considered employee benefits. Benefits are generally taxable for employees and should be included in compensation, unless they are expressly excluded by law. Fortunately for taxpayers, educational assistance benefits are excluded as long as they meet certain conditions.

Educational assistance plans must be in writing and all eligible employees must have reasonable notice of the plan. Like most benefit plans, an education assistance plan cannot be discriminatory: the criteria you specify in the plan must not favor highly paid employees. In addition, the plan cannot provide more than 5% of its benefits during the year to shareholders or owners.

What if you already had enough degrees? Or are you just not interested? You are unlucky. An educational assistance program is for, well, education; you cannot choose to exchange money or other benefits instead.

Here’s how it works on your end: You can exclude up to $ 5,250 in educational assistance that you receive as part of your employer’s educational assistance. Technically, your employer excludes it by not reporting it on your federal W-2 form. So that’s $ 5,250 in educational benefits – free – and not taxable. Pretty awesome, isn’t it? These benefits include tuition, books, supplies, and equipment. Classes do not necessarily have to be part of a degree program, but cannot cover those related to sports, games or hobbies, unless they are business-related or part of a degree program (so the archery course I took in college would have counted, phew!). This does not include meals or transportation, or any tools or supplies (other than textbooks) that you may keep after the course is over.

If the educational assistance provided by your employer is more than $ 5,250 (you’re lucky), your employer must include the excess amounts as wages on your federal W-2 form, and you must report these amounts on your tax return, unless the benefits are working conditions. advantages. A working conditions benefit is one that, if you had paid for it, you could deduct as an employee’s business expense (think continuing education credits, for example). If so, this amount is also excludable.

But don’t be greedy: you can’t use expenses paid by your employer for educational assistance to claim the tuition and fee deduction, or any other deduction credit, including the American Opportunity credit and credit. lifelong learning.


It’s back to school week on the blog! Check back throughout the week for more information on tax breaks for education expenses and more!

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