What is Tuition Reimbursement?
Tuition reimbursement is a fringe benefit companies may choose to offer to their employees. It involves paying for them to take college courses during their employment and can be used to fund (or partially fund) an undergraduate or graduate program. In addition, the fringe benefit can apply to student loan payments made between March 27, 2020 and January 1, 2026. For more information, refer to IRS Publication 15-B.
Are there Tax Implications of Tuition Reimbursement?
If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year from wages subject to employment tax and income tax.
How does Reimbursement Happen?
Reimbursement can be handled in one of the following ways:
- Your employer pays the school for the program directly on your behalf,
- Your employer may require you to pay out of pocket and reimburse you after the coursework is complete, or
- Your employer pays you or the lender for principal or interest on any qualified education loan incurred by the employee for education of the employee.
Do I have to commit to staying at the company after I am reimbursed for a course?
Most often, companies will have a requirement that you stay with the company after reimbursement. This can range from weeks to years. It is important you check the employer policy to see if there are any circumstances if you leave voluntarily or are terminated.
Contact your HR department or check your employee guides to see if tuition reimbursement is offered through your employer.