It says i dont qualify for the American Opportunity nor the Lifetime Learning credit while processing my taxes, but now it says I have to pay fees because I do qualify?

[sophiewojtale]

I'm a full time graduate student and have only had the American Opportunity Credit received on my behalf for three years (the limit is four). Regardless of seeming to meet every criteria I have read about, I was rejected for either credit. However, on the last page of my tax returns (I'm choosing to file for free, by the way), TurboTax informed me that I had to pay several fees because I qualified for the Lifetime Learning Credit and thus had to upgrade to Deluxe -- but I still don't have the Lifetime Learning Credit applied to my refund.

[AmyC]

You are a graduate student now, but what were you on Jan 1, 2021? You have to answer questions based on that date to get the correct AOTC credit. Something is getting crossed in what is allowed for one and not allowed for the other.

Here are the rules from Publication 970 (2021), Tax Benefits for Education | IRS:

AOTC Student qualifications.

Generally, you can claim the American opportunity credit for a student only if all of the following four requirements are met.

1. As of the beginning of 2021, the student had not completed the first 4 years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. For this purpose, don't include academic credit awarded solely because of the student's performance on proficiency examinations.

2. The American opportunity credit has not been claimed by you or anyone else (see below) for this student for any 4 tax years before 2021. If the American opportunity credit has been claimed for this student for any 3 or fewer tax years before 2021, this requirement is met.

3. For at least one academic period beginning (or treated as beginning) in 2021, the student both:

   1. Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and

   2. Carried at least one-half the normal full-time workload for his or her course of study.

      The standard for what is half of the normal full-time workload is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965.

      For 2021, treat an academic period beginning in the first 3 months of 2022 as if it began in 2021 if qualified education expenses for the student were paid in 2021 for that academic period. See Prepaid expenses, later.

4. As of the end of 2021, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance.

Lifetime Learning Credit: Who Can't Claim the Credit?

You can't claim the lifetime learning credit for 2021 if any of the following apply.

• Your filing status is married filing separately.

• You are listed as a dependent on another person's tax return (such as your parents'). See Who Can Claim a Dependent's Expenses, later.

• Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more if filing married filing jointly). MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit.

• You (or your spouse) were a nonresident alien for any part of 2021 and the nonresident alien didn't elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Pub. 519.

• You claim the American opportunity credit (see chapter 2) for the same student in 2021.

[Hal_Al]

Grad students are not eligible for the American Opportunity Credit. There's one exception: if you were still an undergrad, in the spring, and a grad student later in the year, you can count your grad tuition for the AOC.

The Lifetime Learning Credit is non-refundable.  It is not "added to your refund".  It can only be used to reduce an actual tax liability.