1098T - Payments vs Scholarships, Grants

[jhalv10]

After working through the Education/Expenses and Scholarships (Form 1098T) section of TurboTax, it told me I am not eligible for an education credit - even though I received one last year for the first time.  Looking at the numbers, Box 1 was approx $32k and box 5 was $26k - so I'm not sure why it tells me Scholarships and Grants exceed educational expenses.  Does 529 money get rolled into this equation too?  That was about $10k this year, which would put it over the tuition expenses, but it would be used for room and board (vs the $32k for tuition). 

[MaryM428]

You paid $32,000 and had $26,000 in grants and scholarships.  That left $6,000in out of pocket expenses.  Your $10,000 in 529 withdrawals covered that $6,000 with $4,000 left over.  When you use 529 money to cover your expenses, you  cannot claim either of the educational tax credits for the same expense.

[Hal_Al]

Box 1 of the 1098-T does not include room & board or out of pocket costs for books and computers. Room & board, books and computers are all qualified expenses for the 529 distribution.

Yes, TurboTax (TT) is probably factoring in the 529 plan exclusion in denying you the credit.  You want to claim the credit, even if it means paying a little tax on the 529 distribution.  Better yet, have your student declare some of the scholarship as taxable.

Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it ($4000 for the American Opportunity Credit).   You may reach that screen sooner.

[jhalv10]

By going through the education interview again, I realized I did not enter room and board charges under Expenses.  Even though these charges do not qualify for scholarship and grant money, they still need to be entered, since the 529 money can be used for them...so by entering those charges, I had enough Expenses to qualify for the credit.