No benefit with deducting 1098-T for medical school

[dlt113]

My son files as independent status. In the past we had already claimed 4yrs of American Opportunity Credit during undergraduate school.  He attends medical school now.  His income was $7900 in 2021. The 1098-T shows ~$28.6k in qualified tuition and payments (box 1) in addition to purchasing a $2200 laptop for school.

TurboTax runs it's maximizer and advises "You can't claim an education tax break based.  Based on what you've entered so far you are not eligible for an education credit"    Reasons given: a) He can be claimed as a dependent on somebody's return .  <That's false. He files as independent.>  b) There were no net qualified education expenses.   

I do not understand how TurboTax states my son is not eligble for a tax break.  Where to find details with TurboTax's decision making.

[ZoltanB45]

One of the reasons listed for not qualifying is that, "He can be claimed as a dependent" and not whether or not he is a dependent.  The fact that he can be claimed as a dependent was determined because of answers given. Perhaps a question regarding his household or whether he supports himself is what triggered that determination.
 

[Hal_Al]

As zoltanb siad, you just need to answer the personal info questions so that he is not traeted as "can be" claimed as a dependent.

But that may be academic.  He is not eligible for the American Opportunity credit because 1. you already claimed it 4 times (the max allowed) on his education and 2. Grad students are not eligible.

He is eligible for the Lifetime Learning Credit (LLC), but that is not refundable. It can only be used as a credit against an actual tax liability.  With only $7900 of income, he has no tax liability. 

It would actually be better if he was your dependent. You would get a $2000 LLC plus a $500  Other dependent credit. 

[dlt113]

Thank you for the reply. My son's status is independent and single.   He is not not being claimed in my tax filings.     The other piece of this is my son had +$22k in long term capital gains which put him at total

income of ~$30k, which was enter into Turbotax.   Turbotax did calculate his taxes due on the gains

and reduce his tax refund substantial. 

What I am trying to obtain is are the details of how TurboTax  decided Lifetime Learning Credit was not applicable when the program blindly performs "Maximize My Education Tax Break".

[dlt113]

Thank you for the reply. My son's status is confirmed as independent and single. He is not not being claimed in my tax filings. The other piece of this is my son had +$22k in long term capital gains which put him at total

income of ~$30k, which was enter into Turbotax. Turbotax did calculate his taxes due on the gains

and reduce his tax refund substantial.

What I am trying to obtain are the details of how TurboTax decided Lifetime Learning Credit was not applicable when the program blindly performs "Maximize My Education Tax Break". There is no reason/explanation provided just a simple "You can't claim an education tax break".  As I said two possible causes are: Somebody esle can claim you as a dependent" <-that's not the reason   and "There were no net qualified education expenses" <-- hard to believe given +28k in qualified tuition plus $2k for required laptop.

[Hal_Al]

You say "Turbotax did calculate his taxes due on the gains and reduce his tax refund substantial".  That's not supported by the numbers you provided. 

Look at line 16 of form 1040.  It should be 0.  The reason he's not getting the LLC is because he has no tax liability to offset.  I agree, TT could/should do a better job explaining that.  It's shown on the form 8863 worksheet. 

Although he apparently has taxable income (on line 15 of form 1040), his  long term capital gains are taxed at 0% while  his wage income is wiped out by his standard deduction. So, no tax liability.