Daughter finished BS in 3yrs, in May '17 currently in graduate school. Can I claim Education & American Opportunity credit.

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My daughter finished her undergraduate degree in 3 years in May '17 and started Dental School in August '17.She is my dependent. Can I claim Education credits / AOC? 

[Anita01 · Accepted solution]

Yes, but the AOC can only be used for undergraduate expenses, even if it took less than 3 years.

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Thank you. Her undergraduate tuition for the last semester i.e. spring 2017 was included in her 2016 1098-T. Therefore her current 1098-T has zero tuition billed but has over 10k of scholarship. Can we still claim AOC?

[Anita01]

No, not if you already claimed the expenses for her last semester of 2017, while you were doing the 2016 return.  The scholarship will also prevent you from claiming a Lifetime Learning credit for graduate expenses in 2017.  Unfortunately, the amount of scholarship exceeding her eigible expenses will be taxable income, and would be claimed as income on her return, not yours.

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If I follow the prompts in turbo tax and enter both the 1098-T i.e. the undergraduate one with scholarship and no tuition and the graduate school one with tuition and no scholarships  the student info worksheet shows as qualifying for AOC, LLC and tuition and fees deduction. Am I doing something wrong?

[Anita01]

Are you sure you are checking the graduate student box on that 1098?  And the other one should not have half-time student at least checked because she did not meet that requirement for the undergraduate 1098

[Anita01]

And, actually, you should not be entering the one showing only scholarship income since that one should be entered o your daughter's return.

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There is no box to check off showing graduate student and the 1098-T from undergraduate school has box 8 Atleast half time student checked off. However there is one question on the worksheet which says 'Did the student complete the first four years of postsecondary education as of 1/1/2017'. The answer to that question is 'no' as she graduated in May '17. Could that be the reason for showing qualifying for AOC, LLC etc.

[Anita01]

here's the 1098-T with box 9
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1098t.pdf">https://www.irs.gov/pub/irs-pdf/f1098t.pdf</a>

[Anita01]

Answering no to that question should not affect the result if the other 1098-T is filled out correctly

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I just checked and I did check off Box 9 to show that she is in graduate school for that specific 1098-T. So that does not seem to be the problem.
My question is would it be okay for me to delete her undergraduate 1098-T from my taxes and enter it only on my daughters return as unearned income (schedule 12196) and only include the graduate school 1098-T on my taxes.

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Any recommendations on the above comment?

[Anita01]

Yes, it would be okay and actually correct since the taxable scholarship income is required to be claimed on her return.

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Thank you for your help.