In order to qualify for an education tax benefit, you must have paid some education expenses from your own funds or from a student loan. If TurboTax is indicating that you have no net qualified education expenses, that means that the amount of your scholarships exceeds the amount paid for tuition and other qualified education expenses.
If you feel this is incorrect, you should go back through the education section and review your entries.
First, to get any tax breaks for education you must have "earned" income. Additionally, if you qualify to be claimed as a dependent on someone else's tax return (usually a parent) then you don't get any tax breaks.
Education tax credits and deductions are based on out of *YOUR* pocket qualified education expenses paid with earned income that you earned in the same tax year you paid those qualified expenses.
Note also that if the scholarships awarded in box 5 exceeds the amount of qualified expenses paid in box 1, then you have no qualified out of pocket expenses and therefor don't qualify for any tax credits or deductions.
Keep in mind also that after you enter the 1098-T, follow up screens will ask you for those things not included on the 1098-T. So until you finish the education section in it's entirety, it's impossible to know the final results of anything. Even then, those things you may or may not qualify for can change as you continue your tax return past the education section.
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
You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.
Furthermore, 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. 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. You must have actually paid tuition, not had it paid by scholarships & grants. It is usually best if the parent claims that credit.
The fact that turbotax doesn't tell you why you don't qualify is absolutely maddening, making me want to stop using the product. The software knows which flag makes me "ineligible" but I'm guessing Intuit has decided not to have the software tell me why in an attempt to get me to pay for live help services. Intentionally making a product I'm already paying quite a bit for for worse to try to get more money.
if you do not qualify for education expenses, LIVE help will not be able to change that . The answers you have received from Carl, Hal_AL, and AnnetteB6 clearly explain the reasons why some users do not qualify for education tax credits.
Examples of Education Expenses
@tfrye724
I have $12K in college expenses on Form 1098T; no scholarships nor grants. However, Turbo Tax says I do not get a education deduction because my scholarships and grants my exceed expenses. help! Turbo Tax (or intuit support) is unable to help.
Delete the 1098-T and start the education section over.
Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary". Click delete next to the student's name.
If that doesn't take care of it, explain why you thing you qualify for a credit and which credit.
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
https://www.irs.gov/newsroom/american-opportunity-tax-credit-questions-and-answers
https://www.irs.gov/individuals/llc
https://www.irs.gov/pub/irs-pdf/f8917.pdf
You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.
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. You must have actually paid tuition, not had it paid by scholarships & grants. It is usually best if the parent claims that credit.
I have the same question as many others. I'm claiming this credit for my son as I have every year since he entered college. I claim him as a dependent, he was a fulltime student, I paid his tuition, and his qualified expenses in box 1 exceed his tuition credit in box 5 by 100%. Though these amounts are less than in years past (he graduated at the end of last year), I still expected to be eligible for a tax credit. Yet I still get the response that I do not have any qualified expenses. I even get this response when I go back to the form and delete the 50% tuition credit. I can only imagine two reasons for this: there's a minimum dollar amount for expenses to qualify, or something about the adjustments in years past have somehow carried through for this year. I don't really think it can be the latter, because there are no adjustments on the 2020 1098T, and the questions TurboTax asked about the 2019 1098T didn't include anything about the adjustments, just whatever is in box 2 ( which was empty). So I'm flummoxed, and am also thinking about switching to a different company, after seven years with TurboTax.
So I solved it when I took the advice to delete the student and reenter his 1098T info for this year. At the end, that brought me to a screen asking if he'd gotten these credits in past years. At the bottom of the screen, a "4" was pre-entered for the number of years I've claimed the credit. When I went back through my tax forms for prior years, I realized I claimed this credit for 2016, when he started college in September. So that means this would be the fifth year and you only get the credit for four years.
TurboTax doesn't explain any of this, and I don't even know how it knows that I've already claimed him for four, when it doesn't know other things, like whether I filed a 2019 1098T for him. (I mean, it really should have cumulative records, but it doesn't seem to.)
So, problem solved. Maybe this is the situation some other people on this thread are finding themselves in.
Another issue that should be obvious but wasn't to me -- enter your education expenses by clicking the edit button next to the name of the school / student on the Your Education Expenses Summary screen.
Agreed! CAlling Turbo Tax support is a complete waste of time
Yep, this held me up for a while too. I entered the amounts a different way and had to go back and delete them, and then thought that was the source of the other problems. It seems like in past years there was a more streamlined, logical flow through the different screens.
Okay, now that I've actually filed my taxes, I was surprised to see that I do get a tuition deduction. That's because there's a difference between tuition deductions and the American Opportunity Tax Credit. At no point did TurboTax explain this to me (nor did any of the experts responding in this thread). If TurboTax provided more information, something like "You've already claimed the AOTC for four years, but don't worry, you're still eligible for the tuition deduction," that would be very helpful. It offers that kind of help in other sections, so it's hard to see why it's lacking in this one.
I had to go back to that section and hit edit and walk through all the questions on the student - then got to a screen " Education expenses used for a tax credit or deduction" it is asking how much of my sons expenses I was taking credit for on my taxes - it is prefilled as $10,000 !!!!
I set it to 0 and he got credit for all his expenses paid against his 529 above and beyond tuition and no longer was being charged taxes as an excess 529 withdrawl.
Talk about buried and just plain wrong.
There are three things you can do with your Qualified educational expenses (QEE):
Most people come out better (much better), first using QEE for the tuition Credit. The American Opportunity credit is 100% of the first $2000 of QEE and 25% of the next $2000. Usually. you want to set that box "Education expenses used for a tax credit or deduction" to $4000.
Qualified Tuition Plans (QTP 529 Plans) Distributions
General Discussion
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 $2800
3000/5000=60% of the earnings are tax free; 40% are taxable
40% x 2800= $1120
You have $1120 of taxable income
**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.
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit. Most people come out better having the scholarship taxable before the 529 earnings.
Would I be eligible for the lifetime learning credit if I am in graduate school and I have income from capital gains and dividends, but no income from work?
I am not anyone's dependent, and my scholarships did not exceed my expenses (not even close!)
Thank you.
Yes, You can claim the credit if your income is from capital gain and dividends as long as you meet all the other requirements of the Lifetime learning credit.
The credit is a nonrefundable credit, A nonrefundable credit essentially means that the credit can reduce your tax liability to 0 but can't be used to increase your tax refund or to create a tax refund when you wouldn't have already had one
Great, how does one "delete them"? All I seem to be able to do is go back and edit the information but that doesn't help. I know I entered something incorrectly but it didn't let me go back and fix it, it just tells me that the tuition I paid with no grants isn't a net expense... Excuse me? Thousands of dollars out of pocket sure seem like a net expense to me...
I finally figured out that I can delete the student and try again. However, it still says that the amount I paid in tuition for my adult son doesn't qualify for a tax deduction. My main issue with this is that the "reasons" it gives don't apply to anything I entered. The only information is that "based on the information I entered"... but the information I entered shows that I paid tuition for my son out of my own pocket. If there is a valid reason for not being eligible, the software knows it but Turbo Tax refuses to provide any information. As far as I know, Turbo Tax is incorrect and that's the default answer when it can't figure out what went wrong. FYI, refusing to elaborate on why paying thousands of dollars in tuition isn't qualified is a good way to get long-time customers to try elsewhere next year.
Depending on whether your son's tuition would qualify for the American Opportunity Tax Credit or the Lifetime Learning Credit, take a look at the chart in the TurboTax help article below for the specific qualifications of each credit. Each credit has a different phase-out range based on your income where the credit is not allowed to be claimed. Your situation may be related to your income or to another qualification for claiming one of the credits.
@shfoos01 You actually haven't provided enough info, to us, that shows you qualify to claim the credit
What does "adult son" mean. You son must qualify as your dependent for you to claim the tuition credit based on his educational expenses and his 1098-T. Was he a half time or more student? Was ther other assistance (GI Bill, employer reimbursement)
For more help. please provide some numbers. What's in boxes 1 and 5 of the 1098-T. How much other qualified expenses (books, computers and other course materials) was entered?
Thank you for your answer but you seem to have misunderstood my comment. The software should tell ME why; I shouldn't have to go somewhere else to ask. If it's because of dependent status, the software should tell me. If I have already gotten all of the tax deductions allowed for my son, the software should tell me. Why would I have to go outside the software to find out why the software says the tuition I paid doesn't qualify; especially when the software knows EXACTLY why the tuition I paid doesn't qualify for a tax deduction. Basically what I get from TurboTax is "Hey, it doesn't qualify... I'm NOT going to tell you why, you just have to trust me blindly. If you want to know why, just go ask some strangers and give them a bunch of information about your personal situation and they can tell you. I know, but I'm just not going to tell you."