Starbucks Tax Return: How Tuition Reimbursement and Benefits Impact You

Starbucks offers a range of benefits to employees, including tuition reimbursement through its College Achievement Plan. While this program makes education more affordable, it also has tax implications employees should understand when filing their returns.

This article explains how Starbucks’ tuition assistance and other benefits impact taxable income, what forms employees need, and whether they qualify for tax credits.

Income From Wages and Tips

Starbucks employees earn hourly wages, which vary by location and experience. These earnings are subject to federal income tax, Social Security, and Medicare withholdings. The company reports this income on Form W-2, which employees use when filing their tax returns.

Many workers also receive tips, which are taxable. Cash tips must be reported if they exceed $20 in a month, while tips from credit card transactions are automatically recorded. Employees should track their cash tips to ensure accurate reporting and avoid IRS penalties.

Starbucks provides additional compensation through bonuses and stock options under its Bean Stock program. Employees who receive stock grants may owe taxes on the fair market value of the shares when they vest. If they later sell the stock, any profit may be subject to capital gains tax, depending on how long they held the shares.

Tuition Reimbursement and Taxable Amounts

Starbucks’ College Achievement Plan helps employees pay for higher education, but the tax treatment of this benefit depends on the amount reimbursed. Under IRS rules in 2024, employer-provided educational assistance is tax-free up to $5,250 per year. Any reimbursement beyond this amount is considered taxable income and reported on the employee’s W-2.

Since amounts over $5,250 are treated as wages, they increase taxable income, which may result in higher tax withholding or push an employee into a higher tax bracket. Employees should review their pay stubs and W-2 forms to ensure they account for any additional income from tuition benefits when preparing their returns.

Some educational assistance programs may qualify as working condition fringe benefits, allowing certain job-related education expenses to be excluded from taxable income. This applies when coursework is directly related to an employee’s current job and does not qualify them for a new career. Employees seeking to exclude tuition reimbursement beyond the $5,250 threshold should determine whether their coursework meets these criteria.

Tax Forms for Educational Expenses

Starbucks employees receiving tuition assistance should be aware of tax forms related to education expenses. One key form is Form 1098-T, Tuition Statement, issued by eligible educational institutions. This form shows tuition and related expenses paid during the tax year, as well as any scholarships or grants received. If Starbucks pays tuition directly to the school, it may not appear on the 1098-T, so employees should keep records of all payments made on their behalf.

Employees may also need to reference Form 8917 if eligible to deduct tuition and fees. While this deduction was unavailable in recent years, tax laws change, so employees should check whether it has been reinstated. Receipts for course materials should also be kept in case those costs qualify for deductions or credits.

Possible Credit Opportunities

Starbucks employees pursuing higher education may qualify for tax credits that reduce tuition costs. The American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for the first four years of postsecondary education. It covers 100% of the first $2,000 in qualified education expenses and 25% of the next $2,000. Up to 40% of the credit ($1,000) is refundable, meaning employees can receive it as a refund even if they owe no taxes. Income limits apply, with phase-outs beginning at a modified adjusted gross income (MAGI) of $80,000 for single filers and $160,000 for joint filers in 2024.

For employees who have exhausted the AOTC or are taking courses beyond their undergraduate years, the Lifetime Learning Credit (LLC) offers another option. This credit provides up to $2,000 per tax return, calculated as 20% of the first $10,000 in qualified expenses. Unlike the AOTC, the LLC is nonrefundable, meaning it can reduce tax owed but does not result in a refund. It has no limit on the number of years it can be claimed, making it useful for graduate students or employees taking job-related courses.