With the fall college semester quickly approaching, the Internal Revenue Service is reminding employers and employees that under federal law, employers who have educational assistance programs can use them to help pay student loan obligations for their employees.
As part of a wider effort to promote this benefit, the IRS will hold a free webinar on Sept. 14 to help interested taxpayers and tax professionals better understand this special provision.
“The IRS wants to remind both employers and employees about this special feature that can help with student loans,” IRS Commissioner Danny Werfel said. “There is a limited window of time for this educational assistance program, and the IRS wants to make sure employers don’t overlook this option that can help businesses attract and retain workers.”
Though educational assistance programs have been available for many years, the option to use them to pay student loans has been available only for payments made after March 27, 2020, and, under current law, will continue to be available until Dec. 31, 2025.
Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee. These programs can now also be used to pay principal and interest on an employee’s qualified education loans. Payments made directly to the lender, as well as those made to the employee, qualify.
By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.
Employers who don’t have an educational assistance program may want to consider setting one up. In a tight labor market, worthwhile fringe benefits such as educational assistance programs can help employers attract and retain qualified workers.
These programs must be in writing and cannot discriminate in favor of highly compensated employees. For information on other requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits. For details on what qualifies as a student loan, see Chapter 10 in Publication 970, Tax Benefits for Education.
The IRS is taking a number of steps to highlight this important provision.
A free 75-minute webinar will begin at 2 p.m. ET on Thursday, Sept. 14 and will include a question-and-answer session. To register for the webinar or for more information, visit the Webinars for Tax Practitioners page or the Webinars for Small Businesses page on IRS.gov.
The IRS will also be sharing more information about this through e-newsletters that reach the small business, tax-exempt and tax professional communities as well as highlighting this through IRS social media channels.
In addition, Sen. Mark Warner of Virginia shared, “As student loan repayments resume, employers should take full advantage of educational assistance programs that can be used to help pay student loan obligations for their employees,” said Sen. Mark Warner of Virginia. “This benefit not only provides a pathway towards student debt relief for borrowers but also gives employers the ability to recruit and retain high-quality talent. I’m grateful that the IRS is continuing to conduct meaningful outreach to ensure that both employers and employees are seizing this opportunity.”
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