When an employee is looking to go back to school or needs to in order to stay in their profession, their company can pay for that education, which can then be expensed.

But is that income taxable for the employee?

Well, it may fall under what is called “Working-Condition Fringe Benefits.” This means that as long as the schooling meets the below guidelines, the employer can write this off as a company expense and the employee will not be taxed on the income.

Schooling Requirements:

  • related to furthering the employee’s profession within their current field
  • the certification is required by the employer or by the law
  • to develop new skills needed in the current job

If either of the following two situations apply to the employee, then the education expense in question is not classified as a Working-Condition Fringe Benefit and the tax consequences need to be considered.

  • If the education is needed to meet the minimum educational requirements for the employee’s current job
  • the education will qualify the employee for a new profession or field

In the case that the education is not directly job-related and mainly for the benefit of the employee, rather than the business, the company can only deduct up to $5,250 per year. The expensed amount must also be reported as a compensation to the employee. The compensation to the employee then is also classified as taxable income.

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