Can I claim AOTC credit?

[hwangje]

Can I get AOTC credit if my school provides a 1098-T form? What if my school is paid off full due to grants/scholarships/loans and I didn't pay out of pocket could I still get this credit?

[JohnB5677]

To be eligible to claim the AOTC or the lifetime learning credit (LLC), the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution.

The only restriction is that terms of the scholarship allow it to be used for tuition and related expenses or living expenses. income in order to claim the maximum AOTC.

To be eligible for AOTC, the student must:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period* beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

IRS Rules for AOTC

[Hal_Al]

Q. Can I get AOTC credit if my school provides a 1098-T form?

A.  Probably not. There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. They see a 1098-T, in hand,  as Willy Wonka's Golden Ticket to a government handout. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. .  It is usually best if the parent claims that credit. 

You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.

Q. What if my school is paid off full due to grants/scholarships/loans and I didn't pay out of pocket could I still get this credit?

A. Yes, if you are otherwise eligible. In particular,  tuition paid by loans, is counted the same as paid out of pocket.  Furthermore, in many cases, the student can treat scholarships as taxable income, allowing the parents (or himself, if eligible) to claim the credit. See example below.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

What if my school is paid off full due to grants/scholarships/loans and I didn't pay out of pocket could I still get this credit?

[Runnotout]

My child qualifies for AOTC and has received 1098T. Yet Turbotax does not seem to permit the $2500 credit. What is the work around. Thanks

[Hal_Al]

@Runnotout 

Are you claiming the AOTC on your return or is the student claiming it on his? Most students are not eligible, on their own.

There is no workaround.  If you are eligible, you have answered  something wrong, in the interview. But, a lot of people are just not eligible. See https://www.irs.gov/Individuals/AOTC

Only $1000 of the $2500 is refundable.  The other $2500 can only be used to offset a tax liability. 

Why do you think you qualify? 

[Runnotout]

Hi, thanks for the quick reply. It is for my child and I am claiming it on my returns. I know this is eligible as I claimed previous 2 years and she met all the eligibility. She's in her 3rd year now and still working on the same undergraduate studies. 

BTW, I spoke with Turbotax support and they asked me to delete the form and redo. This time the system thinks she is not enrolled into the a qualified undergraduate program. During prior attempt, it two errors. The first was similar and the second was not enrolled into a 4 yr undergraduate course