What are Qualified educational expenses under Section 127?
Qualified educational expenses are costs employers can reimburse tax-free under a properly structured Section 127 educational assistance program, up to $5,250 per employee per calendar year for 2025 and 2026. These expenses generally include undergraduate and graduate tuition, required fees, books, and certain course-related supplies and equipment from eligible educational institutions, as well as qualified student loan repayment assistance when permitted by current law. However, some costs—such as meals, lodging, transportation, and tools or supplies that employees keep for personal use beyond the course—are not treated as qualified educational assistance and must be taxed if reimbursed. Qualified education assistance programs (QEAP) are designed to cover the allowable expenses within the statutory annual limit on a tax-free basis when the plan meets applicable requirements.
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