Education Disbursement

[Stacy33]

My daughter received a W2 from my husband's employer because they give her an education disbursement for college.  This amount is included in box 5 of her 1098-T.  Do we need to file her W2 with our return or does she need to file an individual return for this W2? 

[RobertB4444]

She needs to file an individual tax return to claim the income that she received on the W2.  If she is filing and claiming herself she also gets the education credit associated with the 1098-T.  If you are claiming her then the education credit is on your return.

[Stacy33]

Thank you!  We are claiming her on our return.  Does that amount get listed as Tax-Free Employer Provided Assistance?

[RobertB4444]

No, it is taxable as income and then deducted on the education credit.  It is not tax free assistance because it's been sent as taxable income.  However, you said that the amount was included on box 5 of your 1098-T which reduces the amount of the education credit.  So if you enter the amount as taxable income on her tax return then you do not have to enter it as a scholarship for education credit purposes.