Stimulus Student Loan Employer Contribution

The passage this week of the stimulus bill approved by congress preserves the tax free status of employer payments toward employee student loans through 2025 a marked difference from the year end expiration date included in the coronavirus aid relief and economic security cares act.

Stimulus student loan employer contribution. Here is how it worked before. Both federal student loans and private student loans to be eligible. With passage of the covid 19 stimulus bill in december congress granted a five year extension to a temporary provision of the cares act that allows employers to contribute up to 5 250 annually toward each employee s student debt on a tax free basis.

The provision will expire in five years although experts say. The benefit is set to go until the end of 2025. Prior to the tax free status of employer sponsored student loan repayments both employees and employers faced tax obligations with the employee paying tax on the employer contribution.

The latest stimulus package allows employers to make tax free contributions of up to 5 250 a year to their employees education debt. This law removes barriers for companies to enhance their employee financial wellness recruitment and retention offerings with pre tax student loan repayment and helps empower employees to pay down their debt balances faster. Prior to the cares act an employer s student loan contributions were considered taxable income but now till 2026 they will be tax free and fall under the same maximum up to 5250 as tuition.

The provision in the coronavirus aid relief and economic security cares act perhaps overlooked amid the news of immediate relief through the temporary suspension of monthly student loan payments allows an employer to contribute up to 5 250 annually toward an employee s student loans and the payments would be excluded from the employee s income. Employers are allowed to make tax free contributions up to 5 250 a year toward their employees student loans. 6 january 2021 4 37 am 5 min read.

A provision in the latest coronavirus stimulus package allows employers to contribute to their workers student loans tax free up to 5 520 and the trend is. If an employer were to contribute 5 250 toward an employee s student loan the employer would typically pay around 400 in payroll taxes said poulin. This tax exemption was set to expire on december 31 2020.