IRS Updates FAQs on Section 127 Educational Assistance Programs
Summary
The IRS updated its frequently asked questions about educational assistance programs under Section 127 of the Internal Revenue Code (Fact Sheet 2026-10), revising information about how the rules apply to qualified education loans and the One, Big, Beautiful Bill amendments. The FAQs confirm that up to $5,250 in educational assistance benefits remains excluded from gross income for calendar years 2025 and 2026. Employers should not include these benefits in Box 1 (wages, tips, and other compensation) of employees' Form W-2.
“you won't have to pay any tax on the first $5,250 of those benefits”
What changed
The IRS updated its FAQs on Section 127 educational assistance programs, providing revised guidance on how the tax exclusion rules apply to educational assistance benefits and qualified education loans. The updated FAQs also incorporate amendments related to the One, Big, Beautiful Bill and include a modified sample plan.\n\nEmployers offering Section 127 educational assistance programs should review the updated FAQs to ensure proper tax reporting. The exclusion of up to $5,250 from gross income remains in effect for calendar years 2025 and 2026, with cost-of-living adjustments beginning for taxable years after 2026. Employers should continue to exclude these benefits from Box 1 of Form W-2 for affected employees.
Archived snapshot
Apr 20, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
IR-2026-55, April 20, 2026
WASHINGTON – The Internal Revenue Service today 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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