Q. Can I deduct the taxed amount ($3,750*25%=$937.5) as tuition credit/deduction since I had to pay out of pocket for that portion?
A. Yes, but not exactly like that.
It's actually better. You may use the full $3750 to claim either a tuition credit or the Tuition and Fees deduction. The credit is usually better, but TurboTax will make that decision for you (you can override it). You can do that because the tuition was essentially paid with YOUR after tax money.
