Employer paid Tuition and 1098-T

[bjhale04]

My employer pays my tuition. This is a taxed benefit at work, so they gross it up, tax it, then pay my tuition. 
Is this something that I should be receiving a 1098-T and should I be entering this on my tax return?

[Anonymous_]

I'll page @Hal_Al 

[Hal_Al · Accepted solution]

Q. Is this something that I should be receiving a 1098-T and should I be entering this on my tax return?

A. Simple answer: yes.  If the employer education benefit is included as taxable income, to you, then it is, essentially, you that has paid the tuition and you are allowed to claim a tuition credit based on that money.

But taxes aren't always simple, the education tax benefits being particularly complex.  The school should issue a 1098-T to, you with the tuition paid shown in box1.  There should be nothing in box 5 (scholarships).  But, some schools, mistakenly, include employer tuition assistance payments in box 5.  If this happens (it probably won't), you'll have to make adjustments, in TurboTax, to claim your credit. 

The next question/issue is: why is your employer treating this as taxable income to you?  Employers are allowed to give up to $5250/year, tax free.  Their tuition assistance/reimbursement plan must meet certain rules to qualify for tax free.  You may not claim a tuition credit for tuition paid with a tax free assistance.  

[KrisD15]

It depends.

If the tuition paid is taxed by your employer, it will be listed in Box 1 of your W-2 as earned/taxable income. 

Tuition paid to (most) schools are reported on Form 1098-T box 1 by the education institution and sent to the student. 

At times a school won't send the form for various reasons, so you need to check your school account to make sure tuition paid by your taxable income is reported. 

If eligible for an education credit on your federal return, the 1098-T is required. 

IRS information about education credits

@bjhale04 

[bjhale04]

The first $5,250 was treated as non-taxable. But there were additional payments made above that $5,250 limit. That was all grossed up and taxed. So is that the amount that I should receive on my 1098-T?

[Hal_Al]

Q.  The first $5,250 was treated as non-taxable. But there were additional payments made above that $5,250 limit. That was all grossed up and taxed. So is that the amount that I should receive on my 1098-T?

A.  It's not clear what amount "that" is referring to.  But, it doesn't matter. The amount that the school is supposed to put in box 1 of the 1098-T  is the total amount paid, regardless of the source of the money.  So, expect box 1 to show the $5250 plus the taxed amount.  Expect box 5 to be blank, but don't be too surprised if it isn't.  You are not locked in to what the 1098-T says, if it is not correct.