Personal financial planning is not just about managing individual finances; it also encompasses planning for business owners and their enterprises. In an increasingly competitive job market, effective planning can significantly enhance employee benefits as part of a benefits package, such as a 401(k) plan. One valuable strategy for business owners is educational assistance programs, which can benefit both employees and employers. The IRS’s recent FAQ release, FS-2024-22, clarifies several aspects of these programs.
Educational assistance programs offer tax-free benefits where employers can provide up to $5,250 per year in educational assistance benefits to employees. This includes tuition, fees, books, supplies, and equipment. These educational assistance programs must be formal educational programs but do not necessarily have to be work-related. However, courses for personal enrichment or hobbies generally do not qualify. Employers can also offer tax-free student loan repayment assistance within the $5,250 annual limit until December 31, 2025.
From a financial planning perspective, these programs have several implications. Employees should leverage these benefits to pursue additional qualifications or degrees, enhancing career prospects and earning potential. Utilizing employer-provided educational assistance can significantly reduce out-of-pocket costs for education and minimize student loan debt. Financial planners should incorporate educational assistance programs into clients’ overall financial strategies, ensuring clients maximize these benefits. Employees should engage with HR departments to understand the specifics of their company’s educational assistance programs and plan their education accordingly.
Practical steps for maximizing these benefits include reviewing employer policies to understand the details of the educational assistance offerings and eligibility requirements. Aligning educational pursuits with the available assistance can maximize benefits and minimize costs. Consulting a personal financial planner can help integrate educational assistance into a broader financial plan.
Educational assistance programs provide valuable opportunities for personal and professional growth. By understanding and utilizing these benefits, individuals can enhance their education and career prospects while maintaining a robust financial plan. For more details on educational assistance programs, refer to the official IRS FAQ FS-2024-22.
Internal Revenue Service. “FS-2024-22: Educational Assistance Programs.” IRS, 2024, www.irs.gov.
Tax laws directly impact an individual’s personal financial plan. At Paraklete® Financial we work with CPA’s as part of our client’s collaborative team of advisers. The collaborative team is essential to the personal financial planning process. For more information, please visit us at https://www.parakletefinancial.com
The views expressed are those of the author as of the date noted, are subject to change based on market and other various conditions. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Keep in mind that current and historical facts may not be indicative of future results. The information contained in our presentations have been compiled from third party sources and is believed to be reliable; however, accuracy is not guaranteed.
