When should I claim the AOTC with employer tuition reimbursement?

[user17721689612]

I have an employer tuition program that pays for 100% of my tuition and fees. I started school in the 2025 fall term, but my employer does not report the tuition as income until a February 2026 paycheck. I received a 1098-T from the school for 2025 listing the tuition paid by my company, so I'm worried that if I attempt to claim the AOTC from the tuition reported as income for 2026 it will flag as having actually been paid to the school in 2025 - is it okay to wait until next year to claim the AOTC? I know that I can only claim the amount that is paid over the $5,250 tax-free limit, so it would work better for me to be able to take it next year when the tuition over the limit will be higher. Especially since I did already take a 529 withdrawal to match the cost of room+board and books because those expenses definitely occurred in the 2025 tax year, and I know that I now can't double dip by claiming any of that to trigger the AOTC. Do I even need to report the 1098-T, or can I just say that I paid zero tuition for 2025 and report my 1099-Q for the 529 qualified education expenses?

[Hal_Al · Accepted solution]

You are correct, you may claim the amount over $5250, for the AOTC.

You can only claim the AOTC in the year the tuition was actually paid. Although it's not clear why your employer would pay the school in 2025, but not report it as income to you until 2026 (year end timing/bookkeeping?)

Forget about red flags.  

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 the student has taxable scholarship income. 

If you claim the tuition credit, you do need to report that you got one.

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 2024 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.  In your case, delete the amount over $5250 if shown in box 5. 

[user17721689612]

Thank you for replying! It is a weird scheme, I think it is so that the entire 25-26 school year is contained within the 2026 tax year for their bookkeeping. Their resources say that the fall 2025 tuition they pay counts towards my 2026 $5,250 tax-free limit because they record it in 2026, are you saying that is incorrect and it counts towards the 2025 limit because they reimbursed my account with the school in 2025? 

Since the amount I actually paid in 2025 tuition was $0, and the amount reimbursed was below the tax-free limit, I don't think it makes sense for me to claim the AOTC for this year anyways because I would only be credited the ~$200 I spent on books in 2025. It does look like they're going to tax me on the tuition benefit paid to the school in 2025 as if it was paid to me in 2026, so unless it would be unwise, I will probably ignore the 1098-T from 2025 altogether and then next year report the taxable tuition benefit amount as it is recorded on my paychecks in 2026. I'm not sure how I would go about reconciling their reporting of it as income on my W-2 otherwise, since that does get reported to the IRS.

[Hal_Al]

If the tuition was paid to the  school, in 2025, you can and should claim the AOTC on your 2025 tax return, counting only the amount over $5250.  For AOTC purpose, it doesn't matter that you were not reimbursed until 2026 because tuition was actually paid, on your behalf, in 2025.