Section 127 reform aims to unlock private investment in education

Why it matters:

An outdated $5,250 cap on tax-free employer education benefits from 1986 is limiting private investment in workforce education.

By the numbers:

• The $5,250 cap would be worth about $15,000 today if adjusted for inflation
• 73% of workers are interested in education benefits, but interest drops to 39% when benefits above the cap are taxed
• U.S. student loan debt totals $1.77 trillion, with average borrowers owing $38,375

The solution:

Two bills (H.R. 6401 and 6402) propose to:

• Raise the tax-free benefit cap
• Index it to inflation
• Include books and learning tools in covered expenses

What’s next:

The House Ways and Means Committee has proposed adjusting the cap for inflation starting in 2026.