Tuition reimbursement and lifetime learning credit

[TL87]

I work for a private university and am also getting my MBA partime.  In 2023 my classes totalled $20,000 that the tuition reimbursement plan covered.  Taxes were taken out of my paycheck  for the $14,750 (total-$5250) throughout the year.  My W2 includes the added tuition as income and the taxes withheld.  My 1099T does not reflect any of the tuition reimbursement amounts.  Is there a way that the taxes I paid or the total tuition amount can be utilized for the Lifetime Learning Credit?

[DavidD66]

Sort of.  Your company can reimburse you up to $5,250 in tuition and other costs.  Anything above that is taxable and included in your income.  Because that amount was included in your taxable income, it is considered your after tax money.  That amount you paid tax on (in your case ($14,250) can be used  to claim the tuition credit.  

[TL87]

Thanks for the response- so to clarify when entering amounts in TurboTax I would add the $14,750 to the 1099T box 1 amount? and it's ok for me to change that amount or do I need the university to amend it?

[Hal_Al]

What is in boxes 1 and 5 of your 1098-T?

In your statement " Taxes were taken out of my paycheck  for the $14,750 (total-$5250) throughout the year", what does "(total-$5250)" mean? Is it just coincidental that the amount of withholding is exactly the same as the tax free portion of the tuition reimbursement.

What you describe is not "the way it is usually done".  Universities (unlike other employers) are allowed to do tuition remission totally tax free. 

I work for a private university and am also getting my MBA partime.  In 2023 my classes totalled $20,000 that the tuition reimbursement plan covered.  Taxes were taken out of my paycheck  for the $14,750 (total-$5250) throughout the year.  My W2 includes the added tuition as income and the taxes withheld.  My 1099T does not reflect any of the tuition reimbursement amounts.  Is there a way that the taxes I paid or the total tuition amount can be utilized for the Lifetime Learning Credit?

[TL87]

So now I'm a bit confused. The was no mention that "Universities (unlike other employers) are allowed to do tuition remission totally tax free". how it was explained to me was that the university offers a set number of units that can be reimbursed (paid directly to the university) per year but moneywise the first $5250 would be tax free and then above that taxes would be deducted from my paycheck corresponding to the classes/tuition each semester, But basically for the year the classes totaled $20,000 so after the $5250 was deducted i had taxes withheld on the $14,250.  On my 1099T box 1 has a small amount that was graduate fees i paid and box 5 was empty

[Hal_Al]

Q. Is there a way that the taxes I paid on the total tuition amount can be utilized for the Lifetime Learning Credit (LLC)?

A. Yes, but not exactly. The $14,250 of income, included in box 1 of the W-2, and that the taxes were withheld on, can be used to claim the Lifetime Learning Credit. You only need $10,000 to get the maximum LLC ($2000). The LLC is a non-refundable credit (it can only reduce your tax liability). 

Q.  On my 1099T box 1 has a small amount that was graduate fees i paid and box 5 was empty. So how do I enter  the LLC claim, in TurboTax?

A. Enter the 1098-T with $14,250 (+ the grad fees) in box 1 and box 5 blank.

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly your student has taxable scholarship income. 

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. You will also reach a screen that allows you to adjust the scholarship amount for "amounts not awarded for 2023 expenses".

Or if you find it easier, just change the numbers in boxes 1& 5 to what your records show. The 1098-T that you enter in TT is not sent to the IRS

[TL87]

Thanks for the explanation- very helpful!