Grants

Forum|Forum|5 years ago
April 20, 2021
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I entered my tuition payment from my form 1098-T for 2020. In February of 2021 I received the reimbursement from my employer. Would my reimbursement go on my 2020 taxes or do I wait and put them on my 2021 taxes since I did not receive the reimbursement until 2021.

TurboTax Basic Windows

Hal_Al

Employee

Claim the reimbursement on your 2021 return, since you did not receive the reimbursement until 2021.

You have a choice (actually a tax loop hole). You can claim nothing on your 2020 tax return, since it will be reimbursed in 2021. Or, you can claim a tuition credit, because you are out-of-pocket. But then, you have to report the reimbursement from your employer as taxable income on your 2021 tax return.

Usually, you may not claim a tuition credit for expenses paid (or reimbursed ) by tax free money (e.g. scholarships, grants, VA benefits or employer reimbursement). Employers are allowed to reimburse employees up to $5250 tax free. Anything over that is taxable and included as taxable income on your W-2. So, any expenses over $5250, including books, may be used to claim a tuition credit.

It may get a little complicated reporting the 2021 reimbursement next year. It's best explained by example. Lets say you paid $6000 in tuition, in 2020, and use $4000 of that to claim the tuition credit ($4000 is all you need to get the maximum amount of credit on the American Opportunity Credit).

In 2021 you employer reimburses you $6000. On your 2021 W-2 (received in Jan 20212), he shows $5250 (the maximum allowed) of tax free educational reimbursement and $750 of taxable reimbursement. $750 will have already been included in box 1 of your W-2 as taxable income. You now have to report $3250 (4000-750) as additional taxable income on your 2021 return. $3250 goes on line 8 of form 1040 (schedule 1) as "Taxable Reimbursement". TurboTax can not automatically pull that from your w-2. You have to enter it manually. In TurboTax enter at::

Federal Taxes Tab

Wages and income

Scroll down to:

--less common income

---Misc Income, 1099-A, 1099-C..... (Press start)

----On the next screen, select Other reportable income

-----Two screens in, type Tuition reimbursement and $3250

Alternatively (using the numbers in the example), you can use only $750 to claim the tuition credit in 2020. Then, you will have to do nothing with your 2021 return.