Any tax advantage if I pay my employer back for the educational assistance after leaving?

Forum|Forum|4 years ago
February 27, 2022
1 reply
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In short - In 2019 I received 6,600 in educational assistance from my employer. $5250 of which was tax free and the rest taxed. I had to stay with the company for 2 years, but another great opportunity popped up and I decided to leave 6-months short of the 2 years.

This year I will be paying back the $6,600 to my employer. Is there anything I can do for next years taxes to take advantage of me paying back my employer? Technically - since I am paying back, I paid for my own tuition expenses.
I did receive 1098T last year for 2019 taxes where box had the amount of $6,600 - but due to employer paid - doesn't look like I took advantage of the education credits. (This was for a Masters Degree - only 2 class).

ErnieS0

No. Since most of your educational assistance was tax-free, paying back your employer will not generate a tax advantage.

You would not able to retroactively claim an education credit because you did not pay any tuition. Are are repaying your former employer for tuition assistance. You are not making any payments to a school.

The IRS allows you to claim a tax credit or deduction for repayments of $3,000 or more. However, your taxable portion is only $1,350 ($6,600-$5,250).

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Hal_Al

Employee

I disagree with the other answer. I believe you can file an amended 2019 tax return to claim the Lifetime Learning credit (LLC) for the $6600 you paid "out of pocket" (you shoulda already claimed $1350 of that). The $5250 of tax free assistance has now been reclassified as a loan. As you surmised, the tuition has now been paid with your after tax money, not employer tax free assistance.

You cannot claim a repayment deduction or credit, for the $1350 because it is less than the $3000 minimum. But, if you failed to claim that 1350 for the LLC, you can do it as part of the amended 2019 return.