Form 8917 is not calculating Total Income correctly

[mike88888]

Turbotax is doing something strange on lines 3 and 5 of Form 8917 for tax year 2020.  It should simply subtract line 4 from line 3 (the total income ) to get line 5 but I'm seeing a value in line 5 that is almost $10,000 more than what it should be.  I suspect it has something to do with the $10,200 Unemployment Compensation exemption enacted by Congress in March 2021.  That value gets correctly subtracted off on Schedule 1 line 8 to help determine the Total Income on Form 1040 but Turbotax may have forgotten to take this into account on Form 8917 line 3 when determining the Total Income there.  The Turbotax "Education Tuition and Fees Summary" that  it generates internally calls line 3 the "Modified adjusted gross income" rather than "total income" as the stated on Form 8917.  But I don't know how this "Modified adjusted gross income" was calculated.  Anyone else see this problem?

[rjs · Accepted solution]

It's not a problem, and TurboTax didn't forget anything. The law that established the $10,200 unemployment exclusion specifically says that the excluded unemployment has to be added back to income when calculating Modified Adjusted Gross Income (MAGI) for the Tuition and Fees Deduction. The IRS did not update Form 8917 to indicate this, but TurboTax is doing the calculation correctly.

[DoninGA · Accepted solution]

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-e-impact-to-income-...

When figuring modified adjusted gross income for any of the following deductions or exclusions, include the full amount of your unemployment compensation reported on Schedule 1, Line 7, unreduced by any exclusion amount:

• Tuition and Fees Deduction (Form 8917)

[mike88888]

You are absolutely correct, Turbotax is ultimately doing the right thing on line 5 but without doing the proper research concerning line 3 it is impossible to see why.  Because this tax law was changed so late in the game I understand why Form 8917 could not be changed in time but it would have been nice if Turbotax had found a way to inform its customers that line 3 is really the MAGI and not simply the Total Income carried over from Form 1040.  That would have made the math much more understandable.  Thanks for your help, it is appreciated!!!   I bet a lot of people doing their own taxes made a mistake here.  This is one of the many reasons I use Turbotax but there is always room for improvement.