Solved: Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.
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Level 3

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

So it seems to be giving me the Amer Opp tax credit but I don't think it's right b/c not supposed to include Room and Board. I see no way to fix this in turbo tax after entering 1098-T
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Level 15

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

It doesn't ask because the school made a mistake by including Room and Board in box 1 (or, more likely, you are mistaken).

But, if that is correct, In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid.  That is. you need to manually subtract the R&B and enter just the tuition and fees.

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Level 15

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

It doesn't ask because the school made a mistake by including Room and Board in box 1 (or, more likely, you are mistaken).

But, if that is correct, In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid.  That is. you need to manually subtract the R&B and enter just the tuition and fees.

View solution in original post

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Level 3

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

You are correct, I did make a mistake. They did not include room & board on 1098-T, but they did include tuition/fees for Spring 2019 semester. Which is fine, but then the problem is they only applied the full tuition scholarship for Fall semester since they didn't receive the spring scholarship funds until Jan 2019. Ok, that's fine - I figured out how to add the additional Spring scholarship into TT to keep everything together.
So now I have a new problem: the remainder that was not covered by scholarship across both semesters (fees of less than $2000) was paid using 529 funds. No where is it asking me how this was paid - TT doesn't seem to care that I used 529 funds -  and so it is giving me the American Opp tax credit but I'm pretty sure I'm not eligible b/c I used 529 funds. True? And if so, how do I account for that in Turbo Tax or should I just not even enter the 1098-T at all?? Thank you 🙂
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Level 15

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

If the remaining expenses were totally paid by 529 funds, then none of of the 529 distribution is taxable. The simple thing to do is NOT enter either the 1098-T or 1099-Q.There is no requirement to enter tham, as nothing goes on your actual tax forms.

However, the better option is to claim The American Opportunity credit (AOC) and pay a little tax on the 529 distribution. Read on for a full explanation and example.
_______________________________________________________________________________________________

Qualified Tuition Plans  (QTP 529 QTP)
It’s complicated.
For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q.
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.
You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q.
Example:
  $10,000 in educational expenses(including room & board)
   -$3000 paid by tax free scholarship
   -$4000 used to claim the American Opportunity credit
 =$3000 Can be used against the 1099-Q (usually on the student’s return)

Box 1 of the 1099-Q is $5000
Box 2 is $600
3000/5000=60% of the earnings are tax free
60%x600= $360
You have $240 of taxable income (600-360)

**Alternatively; you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry.
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Level 3

Entered 1098-T which includes BOTH tuition & room/board. Turbo Tax never asks me to pull out the room/board but room/board can't be used for Amer Opp Tax Credit.

Yes, thank you so much! Very helpful and yes I should be able to use AOTC as well and without even having to pay tax on any of the 529 distribution since we have (1) tuition/fees and books not covered by scholarship of @$2000 so will apply that to AOTC; and (2) additional 529 eligible expenses of about the same amount to balance it out (new computer, printer, and supplies that are not eligible under AOTC but are eligible under 529).
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