Hi - in 2021 tuition was 30k.
1. employer assistance of 10k ($5250 tax free) received.
2. 529 withdrawal amount to be determined
Q. In order to avoid double dipping do I take 30k-10k?
or 30k - 5250 tax free portion?
Thank you in advance
Q. Employer assistance of 10k ($5250 tax free). In order to avoid double dipping do I take 30k-10k or 30k - 5250 tax portion?
A. Simple answer: $24,750 (30k - 5250 tax free portion). The other $4750 is taxable income to you. As such, it is treated as wages, for tax purposes, not reimbursement.
But, if you are going also to claim a tuition credit or deduction, you need to adjust for that too. For example, if you want to claim the maximum American Opportunity Credit* (the most generous credit), you will need $4000 of qualifying expenses. So, you would only take a $20,750 distribution from the 529 plan (30,000 - 5250 - 4000 = $20750).
*Graduate school is not eligible for the American Opportunity Credit. You would want to claim the Lifetime Learning Credit (LLC). It takes $10K of expenses for the maximum LLC. You would only withdraw $14,750 from your 529 (30K - 10K - $5250 = 14,750).
Q. Employer assistance of 10k ($5250 tax free). In order to avoid double dipping do I take 30k-10k or 30k - 5250 tax portion?
A. Simple answer: $24,750 (30k - 5250 tax free portion). The other $4750 is taxable income to you. As such, it is treated as wages, for tax purposes, not reimbursement.
But, if you are going also to claim a tuition credit or deduction, you need to adjust for that too. For example, if you want to claim the maximum American Opportunity Credit* (the most generous credit), you will need $4000 of qualifying expenses. So, you would only take a $20,750 distribution from the 529 plan (30,000 - 5250 - 4000 = $20750).
*Graduate school is not eligible for the American Opportunity Credit. You would want to claim the Lifetime Learning Credit (LLC). It takes $10K of expenses for the maximum LLC. You would only withdraw $14,750 from your 529 (30K - 10K - $5250 = 14,750).
Thank you so much for clear answer!!
will look into LLC as I was not aware of the program. Went to graduate school (2006-2010). So looks like I can file for 2009 and 2010 given I can find paper trails.
There's a three year limit for claiming a tax refund. So, it's too late to amend your 2009 and 2010 returns to claim an education credit.