What is a Section 127 plan?
A Section 127 plan is a formal written employee benefit program allowing employers to provide up to $5,250 per year in tax-free educational assistance to employees. These Qualified education assistance programs must meet specific IRS requirements, including written plan documents, non-discrimination rules, and eligibility requirements for expenses. Covered expenses include tuition, fees, books, supplies, and equipment for courses at eligible educational institutions. Benefits remain excluded from federal income and employment taxes for both employers and employees, resulting in combined tax savings exceeding 30% of the benefit value while supporting workforce development objectives.
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