Per IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits, the first $5,250 of educational assistance provided to an employee under an educational assistance program is excluded from taxable wages.
Amounts in excess of $5,250 must be reported and are subject to Federal, State, Local, Social Security and Medicare taxes.
A qualified program may benefit only the employee. A program that provides benefits to a spouse or dependents of employees is not a qualified program.
Benefits paid by a nonqualified program are fully taxable.
Most State of New York programs are qualified programs. Please see IRS Publication 15-B for further information.