The Internal Revenue Service has 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 year 2025 and 2026, you won’t have to pay any tax on the first $5,250 of those benefits and your employer should not include those benefits in your wages, tips, and other compensation shown in box 1 of your 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.
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.
More information about reliance is available.
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Tags: education, Income Taxes, IRS, sec 127, Taxes
