Q. If I only report the first half of reimbursement I received in 2023, I get a pretty big credit applied to my federal refund. Is this the correct thing to do?
A. No. Your are not allowed to do that. Since you know tax free reimbursement is coming, even in the next year, you may not claim a tuition credit based on you temporarily being out of pocket. This situation is actually covered in IRS Pub 970.
Q. How do I go about reporting this on my tax return if the second half applies to fees that were paid for 2023 fall semester?
A. You have nothing to report on your tax return. You paid tuition and it was reimbursed, tax free.
Q. What about future tuition reimbursements for 2024 that are taxed and are reported on my w2?
A. By law, your employer may reimburse you up to $5250 tax free, per year. If they reimburse you more than that, the amount over that (excess) is taxable income to you and is included in box 1 of your W-2. You may claim the tuition credit, based on the excess payments, since that was effectively paid by YOUR after tax money.
