Helping Employees Pay for Education: A Win-Win for Employers
Education costs continue to rise, and for many employees, student loans remain a significant burden. Fortunately, the IRS provides a powerful tool that employers can use to make a difference, Educational Assistance Programs. IRS Tax Tip 2025-59 outlines that businesses can offer up to $5,250 per employee per year in tax-free benefits for education expenses, including student loan repayment.
What Employers Can Cover
Through a properly structured plan, employers may pay for:
Tuition and eligible fees
Books and supplies
Equipment needed for coursework
Principal and interest on qualified education loans
Payments can be made directly to the school, the lender, or even reimbursed to the employee. This flexibility makes the program easy to administer and highly attractive to employees.
Why Employers Should Consider Offering This Benefit
Recruitment and Retention Advantage
Today’s workforce places a high value on education support. Offering this benefit can differentiate your business in a competitive labor market.Tax Savings
Payments up to $5,250 annually per employee are excluded from both income tax and payroll tax. That means employees enjoy tax-free benefits, and employers reduce their payroll tax liability.Employee Financial Wellness
Helping employees pay down student loan debt or cover ongoing education builds loyalty, reduces financial stress, and increases productivity in the workplace.
Important Rules to Follow
Employers should keep in mind:
Benefits cannot be used for meals, lodging, transportation, or personal tools.
Courses involving hobbies, sports, or games generally do not qualify unless part of a degree program or related to the business.
Assistance above the $5,250 annual limit becomes taxable wages.
The IRS provides additional guidance in Publication 15-B, Employer’s Tax Guide to Fringe Benefits and Publication 970, Tax Benefits for Education.
Getting Started
The IRS has even released Publication 5993, Sample Educational Assistance Plan, which employers can adapt to their own businesses. Implementing such a program does not have to be complicated, and it can create lasting goodwill with employees.
Final Thought
Educational assistance programs offer a smart tax strategy for employers who want to support their workforce. These programs reduce taxable wages, lower payroll taxes, and give employees meaningful financial relief. If you are considering offering this benefit, I can guide you through the tax rules to ensure your program is compliant and optimized for maximum savings.
