The Internal Revenue Service issued a news release reminding employers and employees that employers with educational assistance programs can use them to help employees pay the principal and interest on qualified student loans, in addition to other educational costs. While educational assistance programs have been offered for a number of years, the option to use them to pay student loans has been available only for payments made after March 27, 2020. Under the current law, this option continues through December 31, 2025.
Payments made to the employee, as well as payments made directly to the lender, are eligible. The tax-free educational assistance benefits are restricted to $5,250 per employee per year. In general, assistance exceeding $5,250 is taxable as wages. The programs must be formally documented and can’t show favoritism toward high-paid employees.
The IRS is offering a free 75-minute webinar at 2 p.m. ET on Thursday, Sept. 14, for employees and employers interested in learning more about how educational assistance programs can be used to help pay student loan debts for employees. The webinar will include a question-and-answer session to address specific concerns from attendees.
To register for the webinar or for more information, go to IRS.gov’s Webinars for Tax Practitioners or Webinars for Small Businesses pages.
Read the full IRS news release (IR-2023-152) for more information. Contact your HW&Co. advisor with any questions.
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