Do Dual-Credit Courses Count as AOTC Time?

[Achilleus]

I took dual credit courses in high school, half-time my junior year and double full-time my senior year, and earned an associate degree before graduation. I then attended university and am on my fourth year at that university. Do those two years of dual credit count against my American Opportunity Tax Credit time? The requirement on the IRS page is "Not have finished the first four years of higher education at the beginning of the tax year." I have never claimed the American Opportunity credit nor has it been claimed for me. 

TurboTax says that I qualify. My scholarships exceed my tuition costs on my 1098-T, so I thought I shouldn't anyway. Just trying to double check before I file this. 

[Cynthiad66]

First,  the requirement is that you do not take the AOTC more than 4 years.  However, when your scholarships exceed your tuition costs in Box 1 of Form 1098T, you do not qualify for the credit.    

Second, the intent is not to take the AOTC more than 4 years.  So if you are done with undergrad and have not qualified to take the AOTC in any of the four years, there is no issue.  However, if you did not take the credit in any of those four years and possibly could have you can amend to take the credit for three of those years.  Like you said, if your scholarships exceed your tuition costs there is no allowable credit.

[Achilleus]

I have no way to manually say I don't qualify, and all of my scholarship information is entered and that's how TurboTax calculated it. Do I just have to not use TurboTax, or do I trust that their calculations are correct?

Also, those requirements are listed separately on the IRS site: 

• 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

So maybe they are separate requirements? This is my first time filing myself, trying to do things right. 

[Cynthiad66]

You do not have to manually say whether you qualify or not.  You enter your form 1098T accurately, then the system will determine whether you qualify for a credit or not.  One quick way to determine is if your Scholarships, grants etc. in BOX 5 of the Form 1098T exceeds the amount in Box 1, then you most likely, but not necessarily, do not qualify to claim the credit.

Complete the information though because you may have other expenses that qualify that are not on the Form 1098T such as:

Qualified expenses include tuition, any fees that are required for enrollment, and course materials required for a student to be enrolled at or attend an eligible educational institution.  Don't forget books and laptop etc.

Here's how to claim the credit and I recommend you enter this information unless your Scholarships in Box 5 exceeds your Box 1 by an amount that you cannot overcome because then some of the scholarship may become taxable.

ere's how to get to the 1098-T screen if you haven't visited the Education section yet:

1. Open (continue) your return, if you don't already have it open.
2. Search for 1098t and select the Jump to link at the top of your search results.
3. On the Do you want to enter your higher education expenses? screen, answer Yes.
4. Answer Yes to Did you get a 1098-T for the year? and Continue.
5. On the next screen, you can choose how you'd like to add your 1098-T. You can upload a digital copy from your computer or type it in yourself. Select which option you'd like and Continue.

From the Education Expenses Summary screen you can:

• Select Add A Student if you need to enter a 1098-T for someone else (and then resume steps 4 and 5 above); or
• Select Edit to revisit the 1098-T for a previously-entered school or Add New School to enter a new 1098-T.

[Achilleus]

It turns out that there actually was some qualifying expenses. When I went to review my return however, it asked me about the "completed 4 years of postsecondary education" question. How do I respond in this situation, with the dual credit?

[Hal_Al · Accepted solution]

If you do not have enough credits to graduate, you have not completed 4 years of postsecondary education. 

You may be able to claim the credit, even if box 5, of the 1098-T, exceeds box 1. There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this  if the conditions of the grant are that it be used to pay for qualified expenses.

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.

On the other hand, a full time unmarried student, under age 24, even if you don't qualify as a dependent, 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. You usually must have actually paid tuition, not had it paid by scholarships & 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.

[Achilleus]

I had enough to graduate at the beginning of 2020, but did not have all of the requirements for my degree fulfilled until this year. Is the "credits to graduate" referring to the standard 120 credits or for the credits required for my specific degree? 

[Hal_Al]

 Standard 120 credits.

[rhershman]

"However, when your scholarships exceed your tuition costs in Box 1 of Form 1098T, you do not qualify for the credit."

That is not true.  The AOTC covers tuition, fees, required books and supplies.  The 1098T will only reflect tuition and fees and only include books and supplies if they were included in tuition and fees.  If you had out of pocket costs for required books, supplies, equipment then those costs are eligible expenses under the AOTC and are likely not reflected in the 1098-T.  Just make sure you keep your receipts.