IRS Issues New Guidance on Educational Assistance and Tax Exclusions.

The IRS and Treasury Department issued guidance on educational assistance programs, addressing various questions, including definitions, eligibility, and exclusions related to educational assistance benefits. As a part of this guidance, the agency clarifies that under Section 127 of the Tax Code, taxpayers can exclude certain educational benefits from gross income if provided by their employer. These benefits, including tuition, fees, books, and qualified education loan payments made between March 27, 2020, and January 1, 2026, are tax-free up to $5,250 annually and should not be included in Form W-2 wages. The guidance also specifies that tax-free education expenses cannot be used for other deductions or credits and outlines conditions for compliance with educational assistance programs.

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