Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
aaron-d-joy
New Member

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

I was under contract from my former employer to work for them for six years if they paid for my advanced degree.  I left work before the time was repaid, so I have to repay them for moving and tuition expenses, around $20000.  Since they initially paid for all my expenses, I never deducted anything related to my education for the last few years.  Can I somehow deduct this expense this year?

1 Best answer

Accepted Solutions
Opus 17
Level 15

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

If you pay the money back in 2018 and they adjust your W-2, then no further tax deduction or adjustment is needed, the money was already removed from your taxable wages.  Scroll down to part 2.

Part 1. Tax adjustments.

If you repaid the money and it is not reflected on your W-2 (or you quit in 2017 and repaid in 2018), then you have two ways to deduct the repayment from your taxes.

A. You can take a special itemized deduction not subject to the 2% rule.  This is found in the "Other Uncommon Deductions" section.

B. You can take a special tax credit called a "claim of right" credit.  Basically, you refigure your income taxes for each year covered by the repayment and calculate what your taxes would have been if you hadn't received the income you had to repay (how much less tax you would have paid.)  Add up those amounts and take a direct tax credit on the tax return.  This requires using Turbotax desktop version installed on your own computer from a CD or download so you can manually enter the credit in Forms mode.  Turbotax also doesn't calculate the credit for you, you have to do it yourself, or see a professional.

Generally, if your income and tax brackets are about the same, and you already itemize your deductions, the two methods result in the same tax savings.  However, because the tax rate is dropping for 2018, if you make the repayment in 2018, the claim of right method will probably lower your taxes more than the itemized deduction.  

Here is a link to further instructions for the claim of right procedure.  https://ttlc.intuit.com/questions/2993187-claim-of-right-over-3-000-where-do-i-enter-in-turbo-deluxe

Also note that if you use the itemized deduction procedure, the deduction will probably transfer to your state tax return automatically so you get a state tax deduction.  If you use the claim of right procedure, you won't get a state tax deduction or credit automatically, you will have to investigate whether your state has a claim of right procedure.

And finally, there is no way to get your social security tax back, it's just gone.  But the higher income stays recorded on your account which may increase your retirement credits.

Part 2. College tuition

Because you now will have paid for college with your own taxable funds, you are eligible for any tuition credits you qualify for.  But, you can't claim them now (unless you had 2017 expenses, which you can claim in 2017), you have to file an amended tax return for each past year to claim any credits for those years.  And you can only amend your 2014, 2015 and 2016 returns, it is too late to amend older returns.  If you paid education expenses in those years, the amending instructions are attached below.

Likewise, if the company gave you tax free money for moving and you now have to pay it back, that means your moving expenses are paid for with taxable funds and are eligible for the moving expense deduction.  But it sounds like you moved more than 3 years ago so the amending deadline is probably passed to actually claim that deduction.

https://ttlc.intuit.com/replies/3288565

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

7 Replies
Opus 17
Level 15

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

Did you already ask this question under a different username? Look for your answer there.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
aaron-d-joy
New Member

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

I did not.
Opus 17
Level 15

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4178542-my-employee-gave-me-a-sponsorship-to-commit-to-work-for-th...>
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
aaron-d-joy
New Member

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

No, that's a different situation.  I received no payment from my employer and none of this counted as income.  I was not taxed on it.  It sounds like they have a similar situation, but I am leaving my employer and am required to pay them back what they invested in me.  I want to know if that is deductible since I never deducted any of it before, and it is all still technically tuition payments.
Opus 17
Level 15

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

I'm surprised someone else didn't answer this yet.  It's a bit complicated, you have some different options and you may need to test different situations.  I'll try and get a detailed answer later today.

The other thing is, when are you quitting and making the payment?  For example, if you are quitting in 2018 and also paying back in 2018, they may just reduce your 2018 income on your W-2.  You may need to ask HR.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
aaron-d-joy
New Member

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

Fantastic.  Thank you for the detailed responses, these are very helpful.  The discussion on tax adjustments was particularly useful, since I did quit in 2017 and my employer is still trying to hammer out the paperwork for repayment.
Opus 17
Level 15

My job paid for my college, but I resigned and have to pay them back (to the tune of $20000). Is that deductible as education and moving expenses or otherwise?

If you pay the money back in 2018 and they adjust your W-2, then no further tax deduction or adjustment is needed, the money was already removed from your taxable wages.  Scroll down to part 2.

Part 1. Tax adjustments.

If you repaid the money and it is not reflected on your W-2 (or you quit in 2017 and repaid in 2018), then you have two ways to deduct the repayment from your taxes.

A. You can take a special itemized deduction not subject to the 2% rule.  This is found in the "Other Uncommon Deductions" section.

B. You can take a special tax credit called a "claim of right" credit.  Basically, you refigure your income taxes for each year covered by the repayment and calculate what your taxes would have been if you hadn't received the income you had to repay (how much less tax you would have paid.)  Add up those amounts and take a direct tax credit on the tax return.  This requires using Turbotax desktop version installed on your own computer from a CD or download so you can manually enter the credit in Forms mode.  Turbotax also doesn't calculate the credit for you, you have to do it yourself, or see a professional.

Generally, if your income and tax brackets are about the same, and you already itemize your deductions, the two methods result in the same tax savings.  However, because the tax rate is dropping for 2018, if you make the repayment in 2018, the claim of right method will probably lower your taxes more than the itemized deduction.  

Here is a link to further instructions for the claim of right procedure.  https://ttlc.intuit.com/questions/2993187-claim-of-right-over-3-000-where-do-i-enter-in-turbo-deluxe

Also note that if you use the itemized deduction procedure, the deduction will probably transfer to your state tax return automatically so you get a state tax deduction.  If you use the claim of right procedure, you won't get a state tax deduction or credit automatically, you will have to investigate whether your state has a claim of right procedure.

And finally, there is no way to get your social security tax back, it's just gone.  But the higher income stays recorded on your account which may increase your retirement credits.

Part 2. College tuition

Because you now will have paid for college with your own taxable funds, you are eligible for any tuition credits you qualify for.  But, you can't claim them now (unless you had 2017 expenses, which you can claim in 2017), you have to file an amended tax return for each past year to claim any credits for those years.  And you can only amend your 2014, 2015 and 2016 returns, it is too late to amend older returns.  If you paid education expenses in those years, the amending instructions are attached below.

Likewise, if the company gave you tax free money for moving and you now have to pay it back, that means your moving expenses are paid for with taxable funds and are eligible for the moving expense deduction.  But it sounds like you moved more than 3 years ago so the amending deadline is probably passed to actually claim that deduction.

https://ttlc.intuit.com/replies/3288565

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
Privacy Settings
v