Company Tuition Rembursement & Tax Write Offs
- The IRS allows companies to provide you, the employee, educational benefits that are deductible to the employer. Common reimbursement programs include reimbursement upon receipt of your payment, reimbursement based on the grade you receive in the class and reimbursement after a designated period. You may be responsible for repayment of reimbursed educational benefit if you do not meet all your employers specifications related to their educational assistance program. Repayment of tax free educational benefits allows you to deduct the qualified expenses on your income tax return.
- You can deduct different educational expenses to reduce your taxable income. Use your taxable income to determine your tax liability. Tax deductions include student loan interest and qualified educational expenses. Qualified expenses consist of tuition, books and other fees required for attendance or enrollment. Tuition must be from a school the U.S. Department of Education approved in order to claim any deductions. To determine whether your school qualifies, visit the Institute of Education Sciences (See Resource 1).
- Tax credits directly reduce your tax liability making them the most effective use educational expenses paid by you. The IRS currently offers two tax credits, the hope credit and the lifetime learning credit. Qualified programs and degrees, at least half time enrollment and no drug felonies qualify you for the hope credit. College programs, degree and job improvement courses qualify for the lifetime learning credit. Your enrollment status and criminal record do not limit your eligibility for this credit
- Tuition reimbursement, grants and other tax free money used to pay educational expenses are not deductible. Expenses are only deductible one time for tax purposes, which means you cannot deduct your educational expenses as a business expenses for your work, and then as a credit or tuition deduction. You may only claim one of the available two educational tax credits. You deduct your educational expenses in the year you incurred the expenses even if you paid them with loan proceeds.
- After determining your income for your personal tax return, you calculate your adjustments at the bottom of page one. Adjustments include deductions such as moving expenses, retirement plan contributions, student loan interest and tuition and fees. Student loan interest and tuition and fee deductions are subject to IRS imposed limitations, known as phase outs. Your total income compared with the current year thresholds determines any phaseouts on your student loan interest or tuition and fees deductions.