Can you deduct 1098-T when not a student?

[Chrisgmitchell]

My step-daughter basically flunked out of college in mid-2018 (her 3rd year) and was required to re-pay certain scholarship monies over time.  Long story but not getting into all that here.  So that school sent her a 2019 1098-T for those re-payments she made in 2019.   However she was not enrolled anywhere else in 2019.   And because of her age and that she is working full-time, we can't claim her as a dependent.  Her current income is pretty low.   Can she still deduct these expenses?   When I tried to enter this all in Turbo Tax, it says she can't claim the education tax break because she is not eligible.   Is this true simply because she was not a student anywhere in 2019?   Could she perhaps be considered a student for 2019 based on these payment to a higher educational institution and receiving a 1098-T even though she wasn't there?

[AnnetteB6]

No, if she was not enrolled as a student at least half-time in a program leading to a degree, certificate, or recognized credential, then she is not eligible for any education credit.

Repayment of a scholarship is not a qualified education expense and receiving a Form 1098-T showing that repayment is not enough to be considered a student if she was not actually enrolled and taking classes.

There is not a place on the tax return that she can claim the repayment as any kind of deduction.

[Chrisgmitchell]

Kinda of what I figured.  Just wanted to be sure.  Thank you.

[Hal_Al]

I'm gonna give you a conflicting answer. If she was enrolled half time or more, for any period of time, she is eligible for a tuition credit, if she actually paid tuition (and not had it paid by tax free scholarships). The fact that she is paying back the scholarship has converted the scholarship to a loan. That means that any tuition paid was paid by her funds. 

It may be her age that is disqualifying her from the credit. 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. She cannot be supporting herself on parental support, 529 plans or student loans & grants. She must have actually paid (loans count) tuition, not had it paid by scholarships & grants. 

But if she is disqualified from the credit, she may still qualify as your dependent, if she was a full time student for parts of 5 calendar months (e.g. Jan 31 to May 1 counts as 5 months) and was under 24. 

[Chrisgmitchell]

Well, she wasn't a student (full or half) for any period of time during 2019.  We were able to take partial American Opportunity credits for prior years when she was a dependent.  But for 2019 she wasn't a dependent and wasn't a student.  So I think we may be outta luck on this one.

[Hal_Al · Accepted solution]

Yep.  She can't be your dependent if she made more than $4200 of income.

She can not claim a credit because she was not an enrolled student.