1098-T - Expenses and Scholarships

[emrsrc]

I hold permanent residency since 2023 and completed my undergrad education in 2011 outside the US. In January 2025, I started my graduate education in the US and I've recently received my 1098-T from the university for the year of 2025, only box 1 was entered as $15,813.20, box 5 is empty. 

I was full time employed in 2025, as per the pay statements provided by my employer, amounts of $5,992.12 and $4,535.20 are listed as "Education Reimbursement" (total $10,527.32). I assume that $5,250 IRS limit is not listed in my pay statements, so in total I've received nearly the full tuition amount from my employer, but $10,527.32 listed in the pay statements which were subject to taxation.

One more thing to add, I was the one who paid the tuition out of pocket directly to the university, then requested reimbursements as expenses from my employer. My employer decided to "gross up" my reimbursement payments so that the additional tax burden caused by education reimbursement is somehow covered and there was no dediction from my usual pay. All gross-up amounts are listed in my pay statements and part of W-2. Not quite sure if this "gross-up" procedure may change anything.

While I was adding the form 1098-T to TurboTax, I was a bit puzzled about what to enter for "Employer assistance" part. I first added the whole amount ($5,250 IRS limit + $10,527.32 education reimbursement listed in my pay statements = $15,777.32), then system showed $36 American Opportunity Credit (AOTC). 

After that, I've searched on Internet and found out some instructions guiding me to put $5,250 in Employer assistance since this was the amount which was not subject to taxation.

Question 1: Am I really eligible for AOTC considering my situation? We are joint filers and our AGI is below the allowable limit for AOTC.

Question 2: What should I put in "Employer assistance" section in TurboTax considering above?

Thank you so much for your guidance.

[Vanessa A]

Q1. No.  You cannot claim the AOTC since you already completed a bachelors degree, even if it was in another country.  The AOTC is limited to the first 4 years of schooling whether it is in the US or obtained internationally.

It is possible that you could claim the Lifetime Learning Credit, as that does not have a specific number of years you can claim it, but you do have to be attending an eligible educational institution. 

If you are being given the AOTC, then you will need to go back to the education questions and answer that you had 4 years of college credit before 2025.  This will make you ineligible for the AOTC, and will tell TurboTax that you would only qualify for the Lifetime Learning Credit. 

Q2.  For the Employer assistance section you will enter the amount that is not included in your W-2.  which sounds like it is the $5,250.  The rest of it is considered as you paying for your education because you are being taxed on it.  This amount is treated just like you wrote the check to the school. 

[emrsrc]

Thank you Vanessa.

I am getting quite puzzled here since the two of the TurboTax experts (I've upgraded the product to get an expert help just because of this issue) said otherwise. They told me that I am eligible for AOTC since I've never claimed this credit before and 2025 was my first year in my university "in the US". They also said if I tick off "Had 4 years of college credit before 2025" in order for website to get me to Lifetime Learning Credit, that would be considered not answering the questions accurately. 

All the researches I've done and utilizing different AI agents were aligned with that you said, i.e. not being eligible to AOTC, but TurboTax live experts said otherwise.

They also told me to put "nothing" in Employer assistance, since $5250 is already an incentive that IRS provides.

What should I do now?

[DianeW777]

The rules are quite clear about who is eligible for the American Opportunity Tax Credit (AOTC). Here is the key requirement for you and found the the link provided by @VanessaA . Lifetime Learning Credit (LLC) is the only credit you are eligible for.

• Not have finished the first 4 years of higher education at the beginning of the tax year (do not add or take away from this statement).
• Lifetime Learning Credit

As far as the $5, 250 provided by your employer, as allowed by the IRS, if it is not in your taxable wages, you cannot use it. If it is in your W-2 as a taxable amount, then you can enter it as monies you paid as indicated above. The key is whether your employer provided this amount 'tax free' as part of your wages.

@emrahsurucu