AOTC and 529 interaction

[kkmcnett]

Trying to figure out why Turbo Tax is saying I do not qualify for any AOTC. We make under the amount needed to quality. The numbers:

Total college expenses: 18,749

1098T payments: 8,486

529 distributions: 12,900

Out of pocket expenses: 5,849

Is it simply because my 1099Q is higher than the 1098T number? Turbo Tax does not seem to take into account the $5,849 I paid out of my pocket and entered in Turbo Tax. How would Turbo Tax know what the 529 distributions covered (AOTC qualified expenses versus 529 qualified expenses).

I would appreciate any help. I was on the phone with Turbo Tax, but we got disconnected. The agent did not seem to have an answer for this.

[SantinoD]

There could be another reason why you do not qualify. You need to meet the qualifications to claim the credit and be an eligible student. 

Here are the qualifications to claim the credit:

Qualifications for claiming the American Opportunity Tax Credit are:

• You paid an eligible student's qualified education expenses for higher education at any college, university, or vocational school with a student aid program administered by the US Department of Education
• The eligible student is you, your spouse, or a dependent on your return
• For the full credit, your MAGI (modified adjusted gross income) is less than $80,000 ($160,000 if you're filing jointly)
  • For a reduced credit, your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you're filing jointly)
  • There is no credit given if your MAGI is above $90,000 ($180,000 if you’re filing jointly)

An eligible student is defined as a student who:

• Is enrolled at least half-time in a program leading to a degree, certificate, or other recognized credential
• Had at least one academic period beginning during the year
• Didn't claim the American Opportunity Tax Credit for more than three previous years
• Didn't complete the first four years of post-secondary education before the beginning of the year

The American Opportunity Tax Credit cannot be claimed on Married Filing Separately returns nor under any of these conditions:

• The student is a dependent on someone else's return
• The student is a nonresident alien (unless the student's spouse is a resident and they file a joint return treating both as residents, or the parents claim the student as a dependent on their joint return)
• The student had a felony drug conviction

[kkmcnett]

Thanks for the response.

We meet all of the criteria for the Tax Credit. Even the Turbo Tax guy could not figure it out. The only thing I can figure out is that Turbo Tax is simply looking 1099Q form vs the 1098T form. Because the 1099Q is amount is higher than the 1098T, it is stating that we do not qualify. But...it is not taking into account the almost $6K I have paid out of pocket. I entered all of the expenses associated with my son's college expense.

[MarilynG1 · Accepted solution]

If the distribution reported on your 1099-Q is less than or equal to Qualified Education Expenses, (including room and board), you don't need to enter the 1099-Q in your return.  Save it for your records.

This may resolve your issue.  However, TurboTax does not compare amounts on the 1099-Q and 1098-T.  It does look at Box 1 and Box 5 amounts on the 1098-T. 

Here's more info on Form 1099-Q. 

[kkmcnett]

Thanks.

I ended up deleting my 1099Q information, but TurboTax would not recognize the information from my 1098T. After talking to a turbo tax representative, they told me TurboTax works best with Chrome - I was using Firefox. I switched to Chrome, re-entered my 1098T info and it worked.