Treasury, IRS issue frequently asked questions regarding educational assistance programs


IR-2024-167, June 17, 2024

WASHINGTON — The Internal Revenue Service today issued frequently asked questions (FAQs) in FS-2024-22 related to educational assistance programs.

Taxpayers may exclude certain educational assistance benefits from their gross income if they are provided under an educational assistance program. Educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies and equipment. They also include principal or interest payments on qualified education loans made by the employer after March 27, 2020, and before Jan. 1, 2026 (unless extended by future legislation).

Taxpayers do not have to pay tax on the amount of benefits up to $5,250 per calendar year and their employer should not include the benefits in their wages, tips and other compensation shown in box 1 of their Form W-2.

However, it also means that any tax-free education expenses can’t be used as the basis for any other deduction or credit, including the lifetime learning credit.

If any benefits are received under a program that does not comply with the requirements for an educational assistance program under the Internal Revenue Code or if the benefits are over $5,250, the amounts may still be excluded if certain requirements are satisfied.

Amounts paid under an educational assistance program are generally deductible by the employer as a business expense.