How Offering Employee Education Benefits Could Save Your Company Money

It's no secret that attracting and retaining top performers is a huge part of a business's success. One strategy to achieve this is offering employee education benefits. According to Statista, as of 2019, 47% of U.S. employers provided education benefits to employees. In addition to boosting employee morale and engagement, these programs offer another benefit – tax savings for your company.

For companies that still need to tap into this opportunity, understanding how to take advantage of tax incentives* can make offering education benefits a money-saving solution.

About Tax Deductible Education Programs

When your company offers education benefits, you can use certain tax incentives to reduce the cost of offering professional development programs. Under current U.S. tax law, employers can exclude up to $5,250 annually from an employee's taxable income when providing education assistance. In doing this, you support your workforce's professional development and reduce the company's overall taxable income, creating a win-win situation for your business and employees. One main federal program unlocks these financial advantages:

Employer Educational Assistance Program (Section 127): According to the Internal Revenue Code Section 127, this program allows companies to contribute up to $5,250 annually towards qualifying educational expenses for each eligible employee, completely tax-free. These expenses can include tuition, fees, books, and even student loan repayments. This program offers a substantial financial incentive for companies to invest in workforce development, as these contributions are completely exempt from federal income tax.

You can learn more about Employer Educational Assistance Programs on the IRS website.

Working Condition Fringe Benefits

Sometimes, education expenses may be tax-deductible as a working condition fringe benefit, even if they don't qualify under Section 127 or exceed the $5,250 limit. Working condition fringe benefits can be particularly beneficial for job-specific education and training that directly benefits the employer.

The education must be required by the employer or by the law for the employee to maintain their salary, status, or job and serve a business purpose of the employer. Alternatively, education must maintain or improve the skills needed for the employee's present job. An example is employer-funded professional education for a Certified Public Accountant (CPA) or attorney. These professions, among others, require hours each year to maintain their license.

Implementing an Effective Education Benefits Program

Designing an effective education benefits program involves a few basic steps:

• Define Your Goals: Clearly articulate the objectives of your program. Are you aiming to improve employee retention, boost productivity, or attract top talent? Align your goals with your company's overall business strategy.
• Conduct a Needs Assessment: Identify your workforce's skills and knowledge gaps.
• Determine What Benefits to Offer: The most common education benefits are tuition assistance and tuition reimbursement. Meet with your HR and financial team to determine which is the better option for your business.
• Establish Clear Eligibility Criteria: Define who is eligible to participate in the program while considering factors like job role and performance metrics. Ensure that the criteria are fair, accessible, and transparent.
• Select Learning Partners: Partner with reputable educational institutions, online learning platforms, and professional development organizations.
• Develop a Clear Communication Strategy: Communicate the program's benefits, eligibility criteria, and application process to all employees.
• Measure Your Success: Tracking key metrics will help you evaluate the effectiveness of your employee education benefits program.

Consult with Tax Professionals

Tax regulations can be complex, so seeking guidance from qualified tax professionals is highly recommended. An experienced tax advisor can ensure your program follows current tax laws and maximizes the benefits for your company. They can help you navigate specific programs to determine which best aligns with your business goals and maximizes your tax savings.

Partner with LSU Online & Continuing Education

A well-designed employee education assistance program equips your employees with valuable skills, fosters a culture of learning, and boosts employee morale while reducing your tax burden.

LSU Online & Continuing Education provides access to over 150 degrees, certificates, and courses that support employee and business growth. With decades of experience providing workforce education and custom training solutions, we're well-equipped to be your education provider. Learn why students and organizations choose us for their educational needs.

Ready to take the next step? Connect with our Education Benefit Partnerships team to learn more about offering employee education benefits at your company.

*Disclaimer: The information provided in this blog post is for general informational purposes only and should not be used as professional tax advice. We strongly recommend consulting with a qualified tax professional or certified public accountant before making any decisions regarding tax strategies or implementing employee training programs for tax purposes.