The Internal Revenue Service today updated frequently asked questions in Fact Sheet 2026-10 related to educational assistance programs.
An employee’s gross income does not include educational assistance benefits if the benefits are provided under a section 127 educational assistance program and the amounts do not exceed $5,250. Under the One, Big, Beautiful Bill, the amount that may be excluded from gross income is adjusted for increases in the cost of living for taxable years after 2026. For calendar years 2025 and 2026, employees do not have to pay any tax on the first $5,250 of those benefits, and employers should not include those benefits in wages, tips and other compensation shown in box 1 of Form W-2.
These frequently asked questions contain revised information about educational assistance programs generally, including how the rules apply to certain qualified education loans. They also provide updates related to the One, Big, Beautiful Bill amendments and provide a modified sample plan.
The IRS previously issued FS-2024-22 providing answers to frequently asked questions related to educational assistance programs under section 127 of the Internal Revenue Code.
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