I have claimed the American Opportunity Credit for 3 years prior and now it's not letting me claim the 4th. What changed and how do I fix this? I really need help.

[lanasia99]

I have a full tuition only scholarship and pay room and board myself through work-study. Every year, the schools' cost of attendance rises and my scholarship combined and the work study are not enough to pay my school expenses. Before I never had an issue claiming this credit but this year's taxes (2020) is proving to be difficult.

[KrisD15]

If you have enough expense to claim the credit, please go back through the education interview. 

Chances are the screen about which year of the degree you are in is he culprit. 

You can be in the 5th year of school, but still only the 3rd or 4th year of the degree. 

Make sure you are not saying the degree was earned PRIOR to 01-01-2020

[Hal_Al]

@lanasia99  said "I have a full tuition only scholarship"

If your tuition is fully covered by scholarship and that scholarship is restricted to only be able to be used for tuition, you have no expenses that would allow you to claim the American Opportunity Credit. Room and board are not qualified expenses for the AOC. 

@lanasia99  said " I have claimed the American Opportunity Credit for 3 years prior"

You  may have done it wrong for the last three years. On the other hand, if your scholarship is not restricted, then the way to claim the AOC, is to designated some of the scholarship (up to $4000) as paying for room and board.  That part of your scholarship will be taxable income to you, but it frees up tuition, that is no longer paid by tax free scholarship,  to be claimed for the AOC.

[lanasia99]

I think the issue is that the scholarship/grant part includes my pell grant which is for room and board as well as the institutional aid while the 1098-t only includes the amount I pay based on the institutional aid. 

[lanasia99]

This is not trippng me up. Is earning too little money something that could affect this. Because of COVID, I earned only an 1/8 of what I usually do.

[Hal_Al]

Yes, earning too little money is something that could affect this.  The AOC is only 40% refundable. the other 60% can only be used to reduce an actual tax liability. Furthermore, 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. 

[lanasia99]

I am an emancipated ward of the court under 24 and i don't think that my former legal guardians can claim me. 

In 2020, I made $1,931. Do you by chance know of the specific number that is considered making too little? Last year, 2019, I made $7,554 and it gave it to me no problem. 

I'm just upset because at this rate, my refund is going to be too small to even pay TurboTax for doing my taxes.

Also how does CARES act money affect this? I received $1,325 from that. 

[Hal_Al]

@lanasia99  Last year, 2019, I made $7,554 and it gave it to me no problem. 

I assume when you say "gave it to you", it gave you the $1000 refundable credit (line 18c of the 2019 form 1040).

There are two different places in TurboTax (TT) that could be giving you problems. The first is the personal info section, up front.  Because you are under 24, you have tell TT either that you provided more than half your own support with earned income (you don't) or that neither of your parents are living.  

Second, in the education section, you must show that you had at least $4000 of tuition or other qualified expenses, net of scholarships.  If box 5, of your 1098-T,  is more than box 1, you must tell TT that you used some scholarship  for room & board. For example if box 5 is $9000 and box 1 is $7000, say you used  $6000 for R&B. 9000 - 6000 = 3000 of the scholarship was used for tuition. $7000 - 3000 = $4000 of tuition is freed up for the AOC.

The $1,325 CARES act money is tax free and does not, usually, affect the AOC. 

[lanasia99]

Okay. I am slightly suspicious that my 1098-t is wrong but my school says it's right. 

The cost of attendance of my school raises every year, in both tuition and R&B, yet my 2020 1098-t paid amount to the school value is the same as the one for my 2019 1098-t. My scholarship/grant has been corrected and increased properly but if the amount paid to the school box isn't (box 1) will that mess up claiming my credit??? 

[Hal_Al]

The 1098-T is only an informational document. The numbers on it are not required to be entered onto your tax return. You claim the tuition credit, or report scholarship income, based on your own financial records, not the 1098-T. In the 1098-T screen, click on the link "What if this is not what I paid the school" underneath box 1. You will then be able to enter the actual amounts paid. 

It would not be unusual for the school to have recorded Spring 2020 tuition as having been paid in 2019 and therefore it's not in box 1 of your 2020 1098-T.  If you records  (usually the school's billing statements) do not show you (or your scholarships) having paid at least $4000 in qualified expenses (tuition, fees, books, computers other required course materials) in 2020, you will not be able to claim the full $1000 refundable AOC.  Box 1 does not include room and board, which are not qualified expenses for the AOC. 

What are the amounts in boxes 1 and 5 of your 2020 1098-T? Do you have any other qualified expenses (books computer)?