tax question about tuition

[jaym]

I'm going back to college to get my MBA starting next month. My employer will reimburse 100% tuition, books and fees. However, after $5240 of reimbursement, it MAY become taxable as income in the form of a bonus or a gift. I've heard that the IRS will allow a deduction for all of the money if you are getting a masters degree or something. Can anybody shed some light on what kind of tax liability I might have?

[PocketJokers72]

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I'm going back to college to get my MBA starting next month. My employer will reimburse 100% tuition, books and fees. However, after $5240 of reimbursement, it MAY become taxable as income in the form of a bonus or a gift. I've heard that the IRS will allow a deduction for all of the money if you are getting a masters degree or something. Can anybody shed some light on what kind of tax liability I might have?

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It depends on how your company reimburses you. If they report it as earnings and tax it, then you only show the amount they reimbursed as earnings and still take the MAX amount possible on Form 8863. IF they just cut you a check, you can NOT show the amount they reimbursed and take the full amount as credit (this is better, do you see why?? [img]/images/graemlins/grin.gif[/img])

Since you are going for an MBA, I would assume that you have already used the Hope Education Credit for the Maximum two years. The Hope credit maxes out at $2000 of expenses, of which $1500 is your education credit. Anything over $2000 is unusable as a tax credit.

The Lifetime Learning Credit does not expire. This credit maxes out at $10k spent, of which $2k is creditable. There is a complex formula that you use to calculate your actual credit which will come close to $1500, but it is easily spelled out on IRS Form 8863.

If your Adjusted Gross Income is more than $52k (single) or $105k (married/joint filing) then you cannot take either credit. It sucks to make too much money.