Updated October 28, 2026. Quick answer: The IRS has not yet announced the 2027 limit on tax free employer help with student loans. For 2026 the section 127 exclusion is $5,250 a year, a single cap that covers tuition help and loan payments together, and Public Law 119-21 section 70412 made loan payments a permanent part of it. The Act indexes the $5,250 for taxable years beginning after 2026, so 2027 is the first adjusted year, and this page updates the day the IRS publishes the figure.
More on the 2026 tax figures: the 2026 employer student loan repayment limit.
What is not yet announced
As of October 28, 2026 the IRS has not published the Revenue Procedure that sets the 2027 inflation-adjusted amounts; the 2026 version was Rev. Proc. 2025-32. This page states only the 2026 figure, as a 2026 figure, and changes when the IRS publishes the 2027 Revenue Procedure.
The 2026 cap
| Year | Most an employer can pay tax free | Source |
|---|---|---|
| 2026 | $5,250 | Section 127(a)(2); Rev. Proc. 2025-32, section 2, item .09 |
| 2027 | not yet announced | Awaiting the 2027 Revenue Procedure |
| Amount printed in the statute before indexing | $5,250 | 26 U.S.C. 127(a)(2) |
| Rounding of the 2027 increase | Nearest $50 | Section 127(d)(2), added by section 70412 |
The cap is written in the statute: “If, but for this paragraph, this section would exclude from gross income more than $5,250 of educational assistance furnished to an individual during a calendar year, this section shall apply only to the first $5,250 of such assistance so furnished.” The IRS repeated it when it explained the 2025 law: “The maximum exclusion amount of $5,250 will be adjusted for inflation for taxable years beginning after 2026.”
Why loan payments are inside the cap
Educational assistance includes “the payment by an employer, whether paid to the employee or to a lender, of principal or interest on any qualified education loan (as defined in section 221(d)(1)) incurred by the employee for education of the employee”. Before the Act that clause applied only to earlier payments. Section 70412(a) strikes the words “in the case of payments made before January 1, 2026,” so the loan-payment clause no longer has an end date. The Act applies it to “payments made after December 31, 2025”.
How the 2027 figure will be set
Section 70412(b) adds: “In the case of any taxable year beginning after 2026, both of the $5,250 amounts in subsection (a)(2) shall each be increased by an amount equal to” the amount times the cost-of-living adjustment under section 1(f)(3), with 2025 as the base year. The result is rounded: “If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.” The 2027 figure will come from the same formula, in the Revenue Procedure the IRS has not yet published.
Common mistakes
- Treating the loan help as a separate allowance. It shares the single cap with tuition and other educational assistance.
- Using a 2027 number from a vendor or an HR blog. Until the IRS publishes the 2027 Revenue Procedure there is none.
- Assuming the cap rose in 2026. The indexing starts for taxable years beginning after 2026.
Related: the 2027 student loan interest deduction, the 2027 education credits, the 2027 dependent care FSA limit, Form 1098-E boxes 1 and 2, and the 2027 tax numbers.
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Answer againSources
- 26 U.S.C. 127, Educational assistance programs (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
- Internal Revenue Service, Rev. Proc. 2025-32, tax year 2026 inflation-adjusted amounts, as modified by the One, Big, Beautiful Bill Act: www.irs.gov
- Public Law 119-21 (One Big Beautiful Bill Act), July 4, 2025, enacted text (U.S. Government Publishing Office): www.govinfo.gov
Read from the primary documents linked above on October 28, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.