Tuition & books paid directly to the school and they show on the 1098. Can I also put those amounts in the "Books and materials required to be purchased from the school"?

[maglione04]

Just trying to figure out why the AOTC isn't giving me credit for paying tuition.

[Hal_Al]

Q. Can I also put those amounts in the "Books and materials required to be purchased from the school"?

A. No, if they are already included in box 1 of the 1098-T.  That would be entering that amount twice.

Q. Just trying to figure out why the AOTC isn't giving me credit for paying tuition.

A. Are you the student or the parent?  The AOTC law was written  "for parents". How much is in boxes 1 and 5 of the 1098-T?  You generally can't claim tuition covered by tax free scholarship (there is a loop hole available).

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. 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. It is usually best if the parent claims that credit. 

You cannot claim the (up to) $1000 refundable 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#en_US_2024_publink53002gd0e674

[maglione04]

Thank you for responding! I am the parent. Box 1 is $3010.70 and 5 is $5203.25. I thought that you got back 100% of the first  $2,000.

[Hal_Al]

Q.  I thought that you got back 100% of the first  $2,000?

A.  Yes, but normally not when box 5 is more than box 1.

But, as I mentioned, there is a way to get it. 

 There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this  if the conditions of the grant are that it be used to pay for qualified expenses.

Using your numbers as an example: Student has $5203 in box 5 of the 1098-T and $3011 in box 1. At first glance he/she has $2192 of taxable income and nobody can claim the American opportunity credit. But if she reports $5203 as income on her return, the parents can claim $3011 of qualified expenses on their return.

If that $5203 is his only income, he will not pay any tax. 

[maglione04]

Well that's frustrating. Her total bill was over $8k, and scholarships (that were sent directly to the school) covered $5200 so we still had to pay the difference.  

[Hal_Al]

"Her total bill was over $8k".

What were her itemized expenses? Room and board are not qualified educational expenses (QEE) for a tuition credit or even for tax free scholarship. . QEE is tuition, fees, books, other course materials, including a computer. 

[maglione04]

That's where it gets tricky, the school lumps everything in together so the amount we paid included some of her tuition, books, and room and board. Does that mean we can't put her books on the QEE since they're included in the $3011 on the 1098? It seems like we can only include books and material we paid for from Amazon and her laptop, correct? Thank you for all your help!

[Hal_Al]

Q. Does that mean we can't put her books on the QEE since they're included in the $3011 on the 1098?

A. Yes, you can't enter them again, since they are already being claimed as part of the box 1 amount.

Q. It seems like we can only include books and material we paid for from Amazon and her laptop, correct?

A.  Yes, those can be added under books not required to be purchased from the school. 

That's still not going to be enough to get any AOTC, unless you declare some of his scholarship as taxable (the loop hole).

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do the “loop hole”.

[maglione04]

Thank you so much for your help and quick responses!