Will I be in a higher tax bracket?

Question

My job offers tuition reimbursement assitance. The reimbursement would be added to my gross income. Will this reimbursement put me in a higher tax bracket where I would pay more when I file my taxes? Additionally, my huband and I have a home. Will our mortgage payments and interest help offset the additional tax I would pay (if any) from the tuition reimbursement?

Answer 1

Your employer can provide up to $5,250 of tuition benefits to you tax-free each year. These amounts would not be included in your gross income.

If your employer pays you more than $5,250 in tuition assistance, the amount over $5,250 is generally included in your income and you will pay taxes on it. Your employer will also withhold income taxes on this money, so you may not have a balance due when you file your tax return.

If you itemize, and your education is work-related, then the expenses you are paying taxes on are considered unreimbursed employee expenses and can be deducted on Schedule A as Miscellaneous Deductions. If this applies, also include your transportation, parking, books, and supplies.

If you don't use your taxable tuition assistance as unreimbursed employee expenses, you may be eligible for the Tuition and Fees Deduction, the Hope Credit, or the Lifetime Learning Credit on the taxable tuition you paid. You have to work through the possibilities to see which approach is best for you.

Of course your mortgage interest and real estate taxes reduce your taxable income if you itemize, regardless of anything else.

Answer 2

It might, depending on how close to the top of the bracket limit you are. But if it does, it doesn't change the tax on any income under the limit - the higher percent only applies to the amount of income that's over the bracket limit.

You can probably take an education credit for your tuition and fees, and that would pretty much even things out on the extra income - maybe even put you ahead, depending on circumstances.

Answer 3

Good grief NO!!!! Being in a 25% bracket doesn't mean that you pay 25% on everything. You just pay it on the amount of your taxable income that is over that bracket limit. Everything below that is taxed the same as it would be if you didn't have the extra income.

Answer 4

anything added to your income is taxable. Before you proceed, see if the amount you pay is also a deductable learning expense. I have a daughter going to college and we get a deduction for tuition.

Answer 5

Anytime anyone offers to "give" you more money, take it. There is no 100% tax bracket.