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Higher Education Tax-free Reimbursements

As an employer, you can create an educational assistance program for your employees. To qualify as an educational assistance program, the plan must be written and must meet certain other requirements.  This is a great way to reward employees by providing annual tax-free reimbursements of up to $5,250.
Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. Education generally includes any form of instruction or training that improves or develops an employee’s capabilities. The payments don't have to be for work-related courses or courses that are part of a degree program.

Educational assistance benefits don't include payments for the following items.
  • Meals, lodging, or transportation.
  • Tools or supplies (other than textbooks) that you can keep after completing the course
  • Courses involving sports, games, or hobbies unless they:
  • Have a reasonable relationship to the business of your business, or
  • Are required as part of a degree program.
Note that as the employer, if you pay more than $5,250 in educational assistance benefits to an employee during the year, they must generally pay tax on the amount over $5,250. As the employer you need to include in your employee’s wages (Form W-2, box 1) the amount that you pay over $5,250.
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