My institution taxes my graduate benefit. Am I being double jeopardized by my benefit because my income is being inflated by the benefit? What is the income limit?

[ChrisPhilly]

My daughter is 22 in graduate school...she has to take out a loan because my institution takes the taxes out upfront each term.  I thought because my income would be inflated by the benefit, and the taxes were already being removed each term, I would qualify for a educational tax credit.    

[Carl]

Whatever the school charges you for the education is a qualified education expense. They can call it taxes or anything they want. If you are required to pay it to the school as tuition, lab fees, or books, it's a qualified education expense. The school can call it anything they want.

[Hal_Al]

Your question and situation are not clear.

[Carl]

I'm making a wild guess that there's an itemized bill involved here that reads something akin to "tution, $1000" and "sales tax, $120". So the total tuition the parent or student is allowed to claim is $1120 because that's what they paid to the school for the tuition in full. If the school wants to "break it down", then let them.

[Hal_Al]

My wild guess is that poster is an employee of the school and gets free tuition as a benefit. But the value is being imputed as income on his/her W-2 and pay stubs, with taxes withheld.
So, he/she would be allowed the tuition credit since the tuition was paid with after tax money

[ChrisPhilly]

Thanks Carl and Hal!  My benefit did show up as imputed income AND pushed my joint return over the educational credit benefit limit...disappointing!

[Hal_Al · Accepted solution]

There is no income limit for imputed income. So, what the institution is doing is proper.