Can I get a higher AOTC Education Credit than $2500 by using the TurboTax Optimizer?

[TheBeaz]

Hi,

I'm trying to finish up the AOTC Credit for our 3 dependent college students. I get to the end when TT says it will maximize the credit, but it allows me to click on a link that says "Show Me Results For What Else I Qualify For". I click on it and see this:

I don't understand how 2 of the AOTC Credits can be more that $3,000 when TT calculates it different ways that I "qualify for". I went into "letme" through search, but it doesn't allow me to see the larger credit calculations, only choose between the AOTC final maximized calculations and the LLC. Can someone please explain this and if I'm leaving some money on the table? Thank you.

[Hal_Al]

AOTC is $2500 maximum, per student, 40% refundable.  The LLC is $2000 maximum per student. None of the LLC is refundable. 

[AmyC]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the  directions below:

TurboTax Online:

Sign into your online account.

Locate the Tax Tools on the left-hand side of the screen. 

A drop-down will appear. Select Tools  

On the pop-up screen, click on “Share my file with agent.”

This will generate a message that a diagnostic file gets sanitized and transmitted to us.

Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

Open your return.

Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent”

This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.

Please provide the Token Number that was generated in the response.  

[TheBeaz]

[AmyC · Accepted solution]

I see the third 1098-T actually has enough tuition listed to get the full AOTC credit of $2,500 with a few changes.

I went digging and found  1099-Qs showing tuition expenses rather than any room and board costs. Since the 1099-Q is used up from room and board and tuition expenses, it should not be entered. See IRS Pub 970 states: 

Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return.

You only need $1,554 to get the full AOTC for all 3 students. Either you had some room and board the 1099-Q could cover, allowing you more expenses paid out of pocket OR if there were no room and board costs allowed by any college, then you could add the income to the student.  I would bet that you have some room and board expenses, see 529 for Room and Board.

I do see the launch optimizer is giving you numbers above the $2500 max for AOTC but the program is calculating the right numbers. Your goal is for all 3 to say $2,500 and AOTC.

You need to:

1. Remove the 1099-Qs. None have an excess withdrawal.
2. Determine if there are any room and board costs of $1554 for any student to use up the 1099-Q.
3. Change expenses for the third student such that the full AOTC is achieved.

If for some bizarre reason none of the colleges have room and board guidelines, you can add the $1,544 to the student income.

This increases your refund by $388.

[TheBeaz]

Amazing! You were right! In fact, all I had to do was delete all three 1099-Qs and TT automatically recalculated and the total AOTC is now $7500, fully capturing the other $388 refund amount.

So is it safe to just move on with what TT did here or should I dig into the numbers and verify? I still can't really see the background calculations at this top-level view.

[AmyC]

Yes, you are good to move forward. I wasn't looking for anything else but there are no forms with errors showing. You should always view your return before filing. You can pay and see your forms anytime online. To see your forms:

• In desktop, switch to Forms Mode. 
• For online, see How do I preview my TurboTax Online return before filing?