Employer-Provided Educational Assistance

You may receive up to $5,250 in tax-free education benefits from your employer each year. The payments do not have to be for work-related courses. The Tax Relief Act of 2010 extended employer-provided tax provisions through tax year 2012.

Limitation

If your employer pays for more than $5,250 of education benefits for you during the year, you must generally pay tax on the amount over $5,250.

Neither the American Opportunity Tax Credit nor the Lifetime Learning Credit may be claimed for a student in the same tax year that the employer pays all the student’s qualified tuition and related expenses.

Qualified Education Expenses

Educational assistance benefits include payments by the employer for tuition, fees, and similar expenses, books, supplies, and equipment. It does not include payments for meals, lodging, transportation, or tools or supplies (other than textbooks) that you can keep after completing the course of instruction. Qualified education expenses include employer-provided education assistance for graduate-level course.

For additional information on Employer-Provided Education Assistance, see Internal Revenue Service Publication 970.