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How to Provide Employees $26,250 in Nontaxable Student Loan Repayment Assistance

  • Written by Steel Rose

The Taxpayer Certainty and Disaster Tax Relief Act, recently passed as part of the “Consolidated Appropriations Act, 2021,” has significantly extended the tax exclusions for employer-paid student loan repayment assistance introduced under the CARES Act. With this extension, employers can provide employees with student loan repayment assistance of up to $5,250 per year for 2021 through 2025 (up to $26,250 total).

As discussed in detail in a prior article, the student loan repayment assistance must be made under an educational assistance program that meets the requirements of Internal Revenue Code Section 127. When a qualified program is properly structured and utilized, employers and employees will avoid federal payroll taxes on qualifying payments under the program, and employees will not be subject to federal income taxes that would otherwise apply. Prior to the exclusion under the CARES Act, employers could provide direct student loan repayment assistance only through taxable payments. To read more click here

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