1098-T made no change to taxes

[philbu]

I entered my income (about $10,000) and taxes paid and saw the amount of my refund. Then I entered my 1098-T information (about $15,000 in box 1) and that I am full time student and have not used 1098-T deduction before. I expected my federal return amount to increase but it did not. Any idea what is going on? Let me know if more information is needed to help me. Thanks, Phil.

[Bsch4477]

Are you claimed as a a dependent?  If so, you are not eligible for education credit. 

[philbu]

Thanks. My son posted this but asked me to respond (I am Phil, the dad). I have not claimed my son as a dependent. However, I wonder if TurboTax is out of whack as we use the same computer.  I entered my son as a dependent on my taxes and then removed him. Thanks for the answer but something is going on.

[Hal_Al · Accepted solution]

There's nothing out of whack.  Most students cannot claim a tuition credit.  The tuition tax credit law is designed for parents and adult students. 

 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.

Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863

If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit.  The student must still indicate that he can be claimed as a dependent, on his return.  With only $10K of income, it's unlikely your student has a tax liability. 

A better question is: why aren't you claiming him as a dependent. 

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.

A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf