Lifetime Learning Credit or Similar?
January 26, 2013 6:10 AM   Subscribe

YANMA. I am working full-time and taking part-time classes at the same University where I work. They provide a full tuition waiver and just require me to pay taxes on the amount over $5250, as required by the IRS. These taxes are taken out of my paycheck over 4 months. Can I claim this amount somehow when I file my taxes?
posted by sunshine37 to Work & Money (9 answers total) 1 user marked this as a favorite
 
What do you mean by "claim" the amount? If you've paid taxes on something, there is nothing to claim.

Are you trying to deduct taxes you've paid from your tax bill? You can't do that.
posted by dfriedman at 6:26 AM on January 26, 2013


You can only "claim" any monies you actually paid to the school- fees, etc. I think I got a "credit" last year of like $40 from the few hundred bucks I paid for classes taken with a similar benefit. You should be getting a 1098-T form that outlines everything.
posted by ThePinkSuperhero at 6:31 AM on January 26, 2013


Not an accountant, so this might be all wrong, but I have been in this situation, and all that happened is that I paid up the extra taxes. I think you are asking if you can claim the value of the tuition paid for credits? But you didn't pay the tuition, your employer did. The IRS lets you get the $5,250 as a sort of freebie, but otherwise the tuition waiver is pretty much just like additional income from your employer, hence you pay taxes on the extra. What you get out of it is the free credits.
posted by epanalepsis at 6:38 AM on January 26, 2013 [1 favorite]


You need to look very closely at your W-2 and your 1098-T which should both be provided by the university. This can be confusing because there are different ways that the university can report this to the IRS. It sounds like the university might be "paying" you the cost of the tuition and immediately charging you for the tuition, such that on your end you don't actually see this happening. But they will report this on your W-2 as earned income, which is why you need to pay withholding taxes on the phantom income. Likewise, the extra withholding should show up on the W-2 as well. If this is the case, you have technically paid tuition expenses (even though you never saw a bill) and you can use the Hope or more likely the Lifetime Learning Credit to get some money back.

Really the simple answer is to look at Box 1 and Box 5 of your 1098-T form. If the number in Box 1 is larger than the number in Box 5, you can claim a credit on the difference, and most tax software will ask for these numbers and compute it for you. Note that this is simplified and there may be some exceptions so read IRS Publication 970 for details.

Source: many years as a poor grad student.
posted by Durin's Bane at 7:24 AM on January 26, 2013


You're taking graduate classes, enrolled in a graduate degree program, right? If you're not in a degree program, or enrolled in an undergrad degree program, I don't think they're taxable.

Are the classes you're taking directly related to your current job? I'm not an accountant, but I'm doing the same thing; my school's benefits office has said that the benefits won't get taxed as additional income (i.e., I'll get the 37% (!!) back when I file) if I claim them as job training. (Which in my case is totally reasonable.)

Note that I have not yet done this, but I will this time next year. I will probably consult with an accountant first (worth it for what is essentially 37% of $5500; goddamn private school) and not try to do it myself through TurboTax.
posted by supercres at 7:25 AM on January 26, 2013


From the IRS:

Tuition reduction. When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions.

So, I read this to mean that the $5000ish that's not taxable cannot be taken as a credit, but anything over that can (up to the limit for the credit of course).
posted by payoto at 7:29 AM on January 26, 2013


Note that my tuition benefits work slightly differently. In semesters where my $5250 exemption is used up (Summer and Fall), SFS gives me a bill for the cost of tuition and fees. Then the employee benefits center credits my SFS account for 63% of the tuition/fee bill, and I cover the rest out-of-pocket. I'm not sure how that will show up on my 1098T and W-2, since I haven't yet had a semester where that happens.
posted by supercres at 7:29 AM on January 26, 2013


Long story short, make an appointment with an accountant, or talk to your HR/benefits department. Many many people do this every year. They know what's up.
posted by supercres at 7:32 AM on January 26, 2013


These taxes are taken out of my paycheck over 4 months. Can I claim this amount somehow when I file my taxes?

Your employer should record these withholdings and report them on your W-2.

For more information that that, you need to sit down with a tax professional.
posted by valkyryn at 11:10 AM on January 26, 2013


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