Lifetime Learning Credit if employer reimbursed tuition over $5250 tax-free allowance?

[NPChristy]

My client is a nursing student and her employer pays the full tuition of $30K directly to the University.  The tuition payment over the $5250 was included on the student's W-2, box 1.

The 1098-T shows $30K tuition in box 1 and $30K scholarships in box 5.

It appears I can't take a tax credit per Public 970 because 'the expenses were paid with a tax-free scholarship, grant or employer-provided assistance'?  Does that mean only the tax-free portion of the employer-provided assistance ($5250) or ALL employer-provided assistance? 

Logically, if the student was given a taxable bonus of $24,750 which she used to pay for tuition and she paid the school directly, she could get the education credit. But since it's paid to the school directly, does she lose that tuition tax credit benefit?

Thank you!

[Terry53029 · Accepted solution]

She can claim credit for expenses above the $5250 if that is the only amount she did not pay taxes on. When you fill out the 1098T in ProSeries you have to fill out the section " reconciliation of box 5, scholarship or grants"

[NPChristy]

Great news! Logically that makes sense. So the Tax Publication is referring to the tax-free portion of employer tuition reimbursements, not to the taxable portion, correct? So I assume you've done this before? 

[Terry53029]

Yes, and Yes. 😁

[NPChristy]

Thank you! I appreciate your time on this busy day!

[Terry53029]

Your welcome