Tax Insight

IRS publishes guidance on educational assistance programs

Insight
5 minute read
April 23, 2026

What happened?

The IRS on April 20 released updated frequently asked questions (FAQs) in Fact Sheet 2026-10 addressing educational assistance programs under Section 127. Under a qualifying educational assistance program, certain tuition benefits an employer provides to employees can be excluded from taxable income, up to a current cap of $5,250 per year. These benefits up to the applicable threshold are not reported as wages on Form W-2, Wage and Tax Statement, and are not eligible for individual income tax deductions or credits.

Why is it relevant?

The One Big Beautiful Bill Act (Act) added cost of living adjustments to increase the maximum annual wage exclusion of $5,250 for qualifying educational assistance programs, effective for tax years beginning after 2026. The Act also made permanent, for tax years beginning after 2025, the inclusion of qualified education loan repayments to be treated as a benefit counted toward the annual dollar cap in those qualifying programs.

The FAQs provide general information for employers on what constitutes a qualifying educational assistance program, the rules for providing tuition assistance and qualified education loans to employees, applicable nondiscrimination requirements, and related considerations. Although FAQs do not constitute precedential IRS guidance, taxpayers can reasonably and in good faith rely on them when evaluating and implementing tuition assistance policies, provided they are considered alongside the applicable law and regulations.

Actions to consider

Employer-provided tuition assistance has continued to rise in popularity. Structuring these benefits to fit within an available wage exclusion is important so they are nontaxable to employees. The Act’s indexing of the wage exclusion amount for qualifying educational assistance programs beginning after 2026 could make these benefits even more attractive to both employers and employees. Employers should review their tuition assistance policies to assess compliance with current law and the changes made by the Act.