• COVID-19
  • Insights
  • Who We Help
    •   Industrial Automation
    •   Manufacturing & Distribution
    •   A&E Professional Services
    •   International Businesses
      • ◦   Expanding Outside the U.S.
      • ◦   Expanding to the U.S.
  • Services
    •   COVID-19
      • ◦   Cash Flow Confidence Assessment
      • ◦   Maximize Your Loan Forgiveness
      • ◦   5 Key Focus Areas
      • ◦   COVID-19 Resource Center
    •   Client Accounting
      • ◦   Software Solutions
      • ◦   Accounting Support
      • ◦   Reporting
    •   Tax
      • ◦   R&D Tax Credit
      • ◦   Tax Credits & Incentives
      • ◦   Tax Structure
      • ◦   Federal Tax
      • ◦   State & Local Tax
      • ◦   Personal Tax
      • ◦   Other Tax Filings
    •   Advisory & Assurance
      • ◦   Audit & Attest
      • ◦   Financial Statements
      • ◦   Employee Benefit Plan Audits
      • ◦   Technical Accounting & Reporting
    •   Consulting
      • ◦   Data Analytics
      • ◦   Transaction Services
      • ◦   Business Planning
      • ◦   Succession & Exit Strategies
    •   International
      • ◦   International Tax
      • ◦   Foreign Direct Investment
      • ◦   Global Expansion
      • ◦   International Accounting
  • Events
  • Careers
    •   Why C&M
    •   Students
      • ◦   Campus Events
      • ◦   Internships
      • ◦   Reach Beyond Program
    •   Experienced Professionals
      • ◦   Team member profile videos
    •   Opportunities
    •   Employee Journals
    •   Office Tour
  • About Us
    •   How We Help
      • ◦   Service Approach
      • ◦   Affiliations
      • ◦   Communications & Technology
    •   Meet Our Team
    •   Testimonials
    •   Our Videos
    •   Our Story
  • Contact Us
  • Subscribe
CHANGE COUNTRY:
  • United States
  • 中国
  • Client Login
Clayton & McKervey Logo
  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe
    • Most Recent Insights
  1. Home
  2. Insights
  3. Changes to Employer Provided Education Assistance Due To COVID-19

Changes to Employer Provided Education Assistance Due To COVID-19

Posted by Margaret Amsden on April 14, 2020

Margaret Amsden Margaret Amsden

The COVID-19 pandemic has an impact on both businesses and individual taxpayers.  As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, opportunities exist for employers to help their employees in multiple ways. One such opportunity relates to the change made to the Education Assistance Program. This change provides incentives for both employers and employees looking to reduce their tax bill and increase cash flow.

Employer Education Assistance before CARES:

  • Education assistance was only exempt from the employee’s gross income for items such as tuition and fees relating to an employee’s education.
  • Limited to the first $5,250 of educational assistance.

Employer Education Assistance after CARES:

  • Education assistance is expanded to include student loan repayment made by December 31, 2020
  • Payments to student loans can be applied to principal or interest; however, CARES explicitly states that individuals are not allowed to deduct the interest portion as an above the line-deduction on their individual tax return to the extent paid by their employer
  • Exclusion from income continues to be limited to the first $5,250 of educational assistance.

How does this benefit the employer?

  • Reduces their payroll tax liability on payments to employee’s student loans up to $5,250
  • Reduces their Federal and State taxable income by $5,250 as the payment to an employee’s student loan qualifies for a deduction
  • A recruiting tool to acquire top talent

How does this benefit the employee?

  • Reduce employee’s payroll tax burden on exempt wages up to $5,250

Reduce employee’s Federal and applicable State and Local Income Taxes by the employee’s marginal tax rate on the loan repayment

  • As defined by IRC Section 221(d)(1), qualified education loans include indebtedness which is incurred on behalf of the taxpayer, taxpayer’s spouse, or any dependent of the taxpayer
  • CARES also temporarily suspended all Federal Student Loan payments and the accrual of interest until 09/30/2020 and, as a result, these payments may be directly applied only to the principal

Providing tax-free educational assistance provides tax-saving opportunities for both employers and employees. CARES only allows employer payments to qualifying student loans to be excluded from an employee’s gross wages until December 31, 2020. So, if you are interested in providing your employees with this additional benefit, you will need to act quickly.  Please reach out to us if you need any additional assistance in this area.

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

 

Our team is always ready to help.

Please contact us for more information.

Margaret Amsden

Margaret Amsden

Shareholder, Private Client Services

Contact Margaret   |   Read Margaret's bio

related news

Financial Management: 4 Key Technology Transformations

The accounting industry looks a lot different these days than it did 10 years ago. From shifts towards data-driven strategy to the implementation of new technological tools, the profession has…

Read full story

5 Financial Considerations for Architecture and Engineering Firms

Working with walls, light, shadow and the properties of a nearly endless array of building materials, architects and engineers create the spaces in which we live and work. Some are…

Read full story

How to Increase Tax Savings with a Roth IRA-Owned IC-DISC

Did You Know Combining these Strategies Can Help You Save Even More Tax Dollars? Many business owners may already be aware of the very popular tax saving strategies that exist…

Read full story

Family-Owned Businesses: Succession Planning

In this episode of The Sound of Automation podcast, Frank Lashier III, COO of Dominion Technologies Group, Inc. joins us to talk about the challenges of transitioning a business within a…

Read full story

Clayton & McKervey Announces Appointment as Key Global Partner for the Centuro Global Network

Media Contact: Denise Asker, dasker@claytonmckervey.com; 248.936.9488 Southfield, Mich.—April 5, 2021—Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, is pleased…

Read full story

Stay Connected

Here are some additional ways to stay connected.

  • Subscribe to our newsletter
  • View upcoming events
  • Contact us to learn more

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • Careers
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Podcasts
  • Press Releases
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos
    • Ben Smith
    • Beth Butchart
    • Bryan Powrozek
    • Carlos Calderon
    • Casey Haggerty
    • Clayton & McKervey
    • Dave Van Damme
    • Denise Asker
    • Eric Lin
    • Jim Biehl
    • Julie Killian
    • Kevin Johns
    • Margaret Amsden
    • Miroslav Georgiev
    • Nina Wang
    • Rob Dutkiewicz
    • Ruben Ramirez
    • Sarah Russell
    • Sue Tuson
    • Tarah Ablett
    • Teresa Gordon
    • Tim Finerty
    • Tim Hilligoss
  • Main Content
  • Related Insights

Changes to Employer Provided Education Assistance Due To COVID-19

Posted by Margaret Amsden on April 14, 2020

Margaret Amsden

The COVID-19 pandemic has an impact on both businesses and individual taxpayers.  As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, opportunities exist for employers to help their employees in multiple ways. One such opportunity relates to the change made to the Education Assistance Program. This change provides incentives for both employers and employees looking to reduce their tax bill and increase cash flow.

Employer Education Assistance before CARES:

  • Education assistance was only exempt from the employee’s gross income for items such as tuition and fees relating to an employee’s education.
  • Limited to the first $5,250 of educational assistance.

Employer Education Assistance after CARES:

  • Education assistance is expanded to include student loan repayment made by December 31, 2020
  • Payments to student loans can be applied to principal or interest; however, CARES explicitly states that individuals are not allowed to deduct the interest portion as an above the line-deduction on their individual tax return to the extent paid by their employer
  • Exclusion from income continues to be limited to the first $5,250 of educational assistance.

How does this benefit the employer?

  • Reduces their payroll tax liability on payments to employee’s student loans up to $5,250
  • Reduces their Federal and State taxable income by $5,250 as the payment to an employee’s student loan qualifies for a deduction
  • A recruiting tool to acquire top talent

How does this benefit the employee?

  • Reduce employee’s payroll tax burden on exempt wages up to $5,250

Reduce employee’s Federal and applicable State and Local Income Taxes by the employee’s marginal tax rate on the loan repayment

  • As defined by IRC Section 221(d)(1), qualified education loans include indebtedness which is incurred on behalf of the taxpayer, taxpayer’s spouse, or any dependent of the taxpayer
  • CARES also temporarily suspended all Federal Student Loan payments and the accrual of interest until 09/30/2020 and, as a result, these payments may be directly applied only to the principal

Providing tax-free educational assistance provides tax-saving opportunities for both employers and employees. CARES only allows employer payments to qualifying student loans to be excluded from an employee’s gross wages until December 31, 2020. So, if you are interested in providing your employees with this additional benefit, you will need to act quickly.  Please reach out to us if you need any additional assistance in this area.

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

 

Our team is always ready to help.

Please contact us for more information.

Margaret Amsden

Shareholder, Private Client Services

Contact Margaret   |   Read Margaret's bio

related news

Financial Management: 4 Key Technology Transformations

The accounting industry looks a lot different these days than it did 10 years ago. From shifts towards data-driven strategy to the implementation of new technological tools, the profession has…

Read full story

5 Financial Considerations for Architecture and Engineering Firms

Working with walls, light, shadow and the properties of a nearly endless array of building materials, architects and engineers create the spaces in which we live and work. Some are…

Read full story

How to Increase Tax Savings with a Roth IRA-Owned IC-DISC

Did You Know Combining these Strategies Can Help You Save Even More Tax Dollars? Many business owners may already be aware of the very popular tax saving strategies that exist…

Read full story

Family-Owned Businesses: Succession Planning

In this episode of The Sound of Automation podcast, Frank Lashier III, COO of Dominion Technologies Group, Inc. joins us to talk about the challenges of transitioning a business within a…

Read full story

Clayton & McKervey Announces Appointment as Key Global Partner for the Centuro Global Network

Media Contact: Denise Asker, dasker@claytonmckervey.com; 248.936.9488 Southfield, Mich.—April 5, 2021—Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, is pleased…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • Careers
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Podcasts
  • Press Releases
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos

Authors

Read news direct from our managers and stakeholders.

  • Ben Smith
  • Beth Butchart
  • Bryan Powrozek
  • Carlos Calderon
  • Casey Haggerty
  • Clayton & McKervey
  • Dave Van Damme
  • Denise Asker
  • Eric Lin
  • Jim Biehl
  • Julie Killian
  • Kevin Johns
  • Margaret Amsden
  • Miroslav Georgiev
  • Nina Wang
  • Rob Dutkiewicz
  • Ruben Ramirez
  • Sarah Russell
  • Sue Tuson
  • Tarah Ablett
  • Teresa Gordon
  • Tim Finerty
  • Tim Hilligoss

Stay Connected

Here are some additional ways to stay connected.

  • Subscribe to our newsletter
  • View upcoming events
  • Contact us to learn more

Website

  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe

Location

+1 248.208.8860
2000 Town Center
Suite 1800
Southfield, MI
48075 | USA

Connect

  • Events
  • Newsletter
  • Client Login

Social

  • LinkedIn
  • Facebook
  • Twitter
  • Glassdoor
  • YouTube
  • Instagram

Awards

DFP Top Work Places Best & Brightest
Prime Global

Tax | Accounting | Assurance | Consulting | Highly technical and accessible team of CPAs helping growth driven, closely held, middle market companies compete in the global marketplace. Michigan-based accountants and advisors focused on helping business owners in the United States and throughout Europe and China.

Privacy Policy Disclaimer

© 2021 Clayton & McKervey