My 2017 1098T is for $2xxx, my employer reimbursed $1xxx. I should receive $9xx in 2018. Do I show the amts for 2017, and then show the reimbursement in 2018's return?

[atboone1]

I received a 1098 T for the amount of $2xxx for 2017. My employer reimbursed me for $1xxx in 2017. I should receive a $9xx reimbursement from my employer in 2018 if I pass the course. Should I show the amounts on the 1098 T and the employer reimbursement for 2017, and then show the reimbursement for 2018's return pending I pass the course?

[KrisD]

When did you pay?

[atboone1]

Paid Summer, Fall, Spring tuitions in 2017; received reimbursement for 2 semesters in 2017 - should receive third in 2018 (June) pending I pass course.

[KrisD]

The options you have are in the answer.

[KrisD]

The 1098-T reports what was billed in Box 2. If you paid in 2018, the amount that will be reimbursed in 2018, there is no problem, just even everything out on your 2018 tax year return (which means you just won't report anything if the employer reimburses you). 

If you paid in 2017, you have 2 options. 

You can claim the expenses you paid on your 2017 return, then if the employer reimburses you, you will need to recapture the credit on your 2018 tax year return 

OR

You can not claim any of the expenses on your 2017 return. When the employer reimburses you, there will be no need to recapture anything, since you will not get an education credit on the 2017 tax year return (since you will not report the 1098-T). If you are not reimbursed, you would need to amend your 2017 tax year return if you wanted to apply for a credit on the expenses that were not reimbursed. 

According to the IRS:

“Refunds received after 2017 and after your income tax return is filed. If anyone receives a refund after 2017 of qualified education expenses paid on behalf of a student in 2017 and the refund is paid after you file an income tax return for 2017, you may need to repay some or all of the credit. See Credit recapture next.

Credit recapture. If any tax-free educational assistance for the qualified education expenses paid in 2017, or any refund of your qualified education expenses paid in 2017, is received after you file your 2017 income tax return, you must recapture (repay) any excess credit. You do this by refiguring the amount of your adjusted qualified education expenses for 2017 by reducing the expenses by the amount of the refund or tax-free educational assistance. You then refigure your education credit(s) for 2017 and figure the amount by which your 2017 tax liability would have increased if you claimed the refigured credit(s). Include that amount as an additional tax for the year the re-fund or tax-free assistance was received.

If you pay qualified education expenses in both 2017 and 2018 for an academic period that be-gins in the first 3 months of 2018 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2018 instead of reducing your expenses for 2017.” 

CLICK HERE for IRS Pub 970 Education Credits