Lifetime Learning Credit if I paid tuition last year, Employer will partially reimburse tuition later this year?

[Becky40]

Hi,

I received a 1098-T for tuition I paid in 2021 for classes I took last fall and currently this winter. My employer will reimburse about half of the tuition, but only after I complete the classes. I would like to claim the lifetime learning credit for the part of tuition I will not be reimbursed for, but I am not sure how to do that when the years I pay tuition are not the same as the years I am reimbursed.

2021 - I paid a big chunk of tuition

2022 - I will pay a little more, but be reimbursed for 2021/some of 2022.

2023 - I don't pay any tuition, but am reimbursed for some of 2022.

Would I report what I actually paid out of pocket as the amount of tuition paid in 2021 and ignore the fact that I'll be reimbursed later on, or do I report what I paid less what I expect to be reimbursed? It seems weird to equally weird to put down something that hasn't happened yet and something that is just ignoring the reimbursement.

[PattiF]

Yes, you should report the amount of tuition that was paid in 2021 on your tax return.

When you are reimbursed for the tuition that you paid in the future, you will enter all reimbursements as other income.

[Hal_Al]

Yes, you can claim just  the part of tuition you will not be reimbursed for, for the LLC.

Report only what you paid less what you expect to be reimbursed.  For simplicity, when you enter the 1098-T just report the amount you will be claiming in Box 1. Box 5 should be blank.  Lying to TurboTax to get it to do what you want does not constitute lying to the IRS. What you enter is not sent to the IRS. 

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. 

If you claim the tuition credit, you do need to report that you got one or that you qualify for an exception (the TurboTax interview will handle this)

You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid (in your case, the amount you are claiming)

[Hal_Al]

What @PattiF says if different from what I said, but it is not wrong.  It's an option.

You have a choice (actually a tax loop hole). You can claim only the portion that will not be reimbursed, as I previously described. Or you can claim all your tuition on your 2021 tax return, since it will not be reimbursed until 2022 (you are technically "out-of-pocket").  But then, you have to report the reimbursement from your employer as taxable income on your 2022 tax return.

It may get a little complicated reporting the 2022 reimbursement, when you file in 2023.  Reply back for instructions, if that's what you decide to do.