Does this hold true if I also received $3,500 in scholarships from the school?
The scholarship from the school was not reimbursed by your employer so it isn't added together or treated like your employer paid tuition.
Here is a link to whether that scholarship is taxable.
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/3651222">https://ttlc.intuit.com/replies/3651222</a>
The scholarship amount automatically went towards the tuition owed. The scholarship plus total reimbursement was around $1,500 more than the total tuition. I'm confused about how exactly to report all this in TurboTax. Adding the full amount reduced my return amount by ~$800.
You do not enter any of the employer's reimbursement as it is non-reportable. If the scholarship covered tuition only, then you do not need to report that either. Neither is income based on what you have listed above.
"You do not enter any of the employer's reimbursement as it is non-reportable. If the scholarship covered tuition only, then you do not need to report that either. Neither is income based on what you have listed above".
That's a wrong statement.
You said "The scholarship plus total reimbursement was around $1,500 more than the total tuition". That means you got $1500 that did not pay for qualified educational expenses. You have about $1500 of taxable income (You may reduce the $1500 by any other qualified expenses; usually books). It doesn't matter whether you choose to declare $1500 of the scholarship or $1500 of the reimbursement, as the taxable income. You have taxable income because of the overlap in payments.
You have ~$1500 of taxable income to report.
By law your employer can only give you $5250 maximum, tax free. If your tuition was less than that, and you employer reimbursed it all; it’s safe to assume it does not need to be reported. But in your case about $1500 did not go to tuition or other qualified expenses (fees, books and other course materials including computers), so it is taxable income.
If you work your way through the education expenses section, TurboTax (TT) should end up adding $1500 to line 7, of form 1040, with the notation SCH.
Or you can use a simpler work around. Do not enter any education expenses and just enter the $1500 as income. Report the income as misc line 21 income. In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages & Income
Scroll down to:
-Less Common Income
-Misc Income, 1099-A, 1099-C
- On the next screen, choose – Other reportable income - Enter the number and "taxable scholarship" or "excess reimbursement" for description.
There is a tax “loophole” available. You can report your scholarship and reimbursement, up to the amount needed to claim the American opportunity credit, as income on your return. That way, you can claim the tuition credit on your return. You can do this because that much tuition was no longer paid by "tax free" scholarship.
Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 2. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, she can claim $4000 of qualified expenses on her return.
so my tuition paid was 3731 and the reimbursement was only for 2558 do I need to report the both the tuition paid and the reimbursement?
Q. My tuition paid was 3731 and the reimbursement was only for 2558 do I need to report the both the tuition paid and the reimbursement?
A. You have no income to report. But you may be able to claim a tuition credit based on the $1173 difference (3731 - 2558 = 1173). How you enter it in TurboTax (TT) depends on your documentation. Typically the school reports $3731 in box 1 of the 1098-T and 0 in box 5 (because you got reimbursement, not scholarship). In that case, you have to tell TT, when it asks, about the reimbursement, so that it only uses $1173 for the credit, not $3731.
What about the part where it asks about books bought directly from the school?
Yes, enter the books costs. That will be added to the $1173 in calculating your tuition credit.