My employer didn't reimburse my tuition until after the tax year was over. Should I report this on the 2017 or 2018 taxes?

[w-kanewske]

I am pursuing my master's degree and took classes in the Fall of last year 2017. My employer will pay for my class however I must show that I pass before they reimburse. Because of this, the payment was not received until January to cover my Fall class. Additionally I went ahead and paid for my Spring classes in mid December. As I am filing my return I ran into an issue where I reported my tuition being roughly 8K for both Fall and Spring which I paid in 2017. However, I did not receive the reimbursement for Fall, until January 2018 thus my employer contribution is 0 for 2017. Is this how I should file it? If I don't include reimbursement from my employer, my Lifetime learning Credit is much larger however I am not sure this is the right thing to do. Additionally, if I report my reimbursement on this tax return I will be under reporting my employers help for next year. How should I file this?

[KrisD]

If you have not yet filed, claim the reimbursement against the expenses for 2017. You are right, if you do not, and you report the reimbursement in 2018, you will also need to "Recapture the education Credit" for 2017.  Since you will reduce the education expenses you claim for tax year 2017 for this reimbursement, you can use the expenses on your 2018 return if needed to offset the reimbursement if it is reported on your 2018 W2. Be sure to keep copies of all pertinent statements and receipts with your tax files. 

According to the IRS:

“Refunds received after 2017 but before 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 before you file an income tax return for 2017, the amount of qualified education expenses for 2017 is reduced by the amount of the refund. “

CLICK HERE for IRS Pub 970 Education Credits

[mikedata11]

Hi, I had a similar situation.  I took the Lifetime Learning Credit in 2018, then received tuition reimbursement in 2019 from my employer.  Can you exclude that under the $5250 non-taxable allowable assistance, or do I have to recapture it as additional tax this year? I'm just not sure about the term "refund", as it seems to apply to getting an actual refund from the school, whereas the $5250 allowable refers to employer "assistance", so I'm unsure which to go by.  Thank you.  

[offroad6901]

It seems like you benefitted from not including nontaxable Employer Provided Assistance (EPA) in the reduction of your tuiton, thus making your credit larger. But in all reality if you received 5,250 in 2019 for 2018, and if you received 5,250 in 2019 for 2019, the second 5,250 would automatically be taxable income on your W2 whether your reconcile last year or not. But this would leave you with 10,500 in 2019, so let's say you have 8,000 worth of tuition, how does it work now since your upside down? If you had 11,000 grand worth of tuiton it would work out alright, because you would balance out in the case of the LLC, but if you had less costs than EPA that year it could work against you and make you owe interest on the tax advantage you received while paying more in income taxes to begin with equaling no credit. I would say you would need to claim it against last years if you have not already completed the tax return to make the numbers match therefore reducing your chance of an issue. This is a very good discussion that I am also needing an answer to. I am wondering, do we have to reduce our tuiton by the amount we receive whether taxable or nontaxable? And how does recieving my EPA after filing affect me if I don't have enough tuiton expenses to cover my EPA in the next year? Also, I am not sure whether or not we reduce our tuition by taxable benefits received anyways. Any other input or answers would be greatly appreciated.

I found this article which might help,  https://www.irs.gov/credits-deductions/individuals/education-benefits-no-double-benefits-allowed

[KrisD15]

Employer assistance cannot be allocated any other way except to the tuition it was meant to cover.