Employer-Provided Education Assistance

Tax Treatment and Conditions

Employees may be eligible for an exclusion of up to $5,250 in employer-provided education assistance. This amount is not indexed for inflation.

The exclusion provision with respect to graduate-level courses provided in Code Section 127 was made permanent by EGTRRA. However, this EGTRRA provision expires after December 31, 2010.

The exclusion applies without regard to an individual's AGI. Thus, it may provide a real tax benefit when no other benefit may be available.

The exclusion applies only to tuition and related expenses.

EGTRRA expanded this benefit to cover graduate courses.

Courses need not be directly job-related, but do not include payment for courses involving sports, games, or hobbies. The employer treats the education assistance as a tax-free benefit on the employee's W-2 form.

If a student's employer pays for courses, the student cannot claim a Hope scholarship credit or Lifetime Learning credit.