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Nani84
New Member

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

My employer pays 100% of my college tuition. I received a form 1098T through my school. After entering my form 1098T, I was told that I was eligible for the American Opportunity Tax Credit. This increased my refund by almost $2,000. I am a bit confused as to whether or not I am actually entitled to this tax credit since I am fully reimbursed by my employer for tuition. I don't want to claim the credit and later get audited or in trouble with the IRS. Any advice? Should I just leave the form off of my taxes? 

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6 Replies
Carl
Level 15

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

In a nutshell, if the employer reimbursement is included in box 1 of your W-2, then you're good to go claiming the AOC with no issues.
georgesT
New Member

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

It depends.

If the tuition reimbursement was not included in your W2, you should not claim that as credit.

If your employer included the tuition reimbursement in your W2, you should enter the 1098-T if you anticipate claiming an education credit.

Tuition reimbursement from your employer is not taxable, up to a limit of $5,250 per year. Your employer shouldn't include those benefits in your wages, and you don't have to include that income on your tax return, either.

If you have expenses in excess of $5250, then you may be eligible for an education credit, but continue reading.

Amounts in excess of $5,250 are taxable and must be included in income on your W-2. If the expense was for education required to keep your job, or that improves your skills in your current job, then you may take a deduction on Schedule A under Job-Related Expenses, subject to a threshold of 2% of AGI. Remember to account for the $5,250 tax-free portion of employer assistance. If your education is not related to your current job, then you can claim an education credit for the cost that exceeds your tax-free amounts. For graduate work, the two credits that apply are the Lifetime Learning credit and the Tuition and Fees deduction. You are free to choose whichever approach fits and gives you the lowest tax.

To enter education expenses in TurboTax Online Premier edition, type "education expenses" in the Search box, then select Jump to education expenses. The program will guide you through the information you need to enter.

For more information about work-related education expenses, see Employer-Provided Educational Assistance in Publication 970, Tax Benefits for Education.

Nani84
New Member

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

Part of my tuition reimbursement ( $524.00 ) was included on my W2. Does that mean I should only claim $524.00?
Carl
Level 15

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

Yes.
alexyanu
New Member

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

So, I get reimbursed 2,500 from my employer for tuition reimbursement.  I understand I do not need to claim that as income.  My question is, do I need to reduce the amounts on my 1098-T by that amount for calculating the educational credits?

AmyC
Expert Alumni

Am I eligible for the American Opportunity Tax Credit if my employer pays 100% of my tuition?

Yes.  Education Benefits -- No Double Benefits Allowed | IRS states:

  1. Take the total amount of qualified education expenses paid for the student
  2. Subtract the amount of tax-free educational assistance the student received
  3. Use any remaining qualified education expenses to claim an education credit.

@alexyanu

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