TurboTax will ask for all of the information contained in your Form 1098-T, as well as information for:
-"Other Scholarships/Grants/Fellowships"
-"Veterans Education Benefits or certain Indian Tribal Payments"
-"Employer-Provided Assistance"
Per the TurboTax On Demand Tax Guidance:
What is the American Opportunity Credit?
The American Opportunity Credit provides up to $2,500 for each eligible student per year. It can be claimed for the first four years of post-secondary education.
The term "qualified tuition and related expenses" includes expenditures for "course materials." For this purpose, the term "course materials" means books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.
Forty percent of this is a refundable credit, which means that you can receive up to $1,000 even if you owe no taxes. However, none of the credit is refundable if the taxpayer claiming the credit is a child (a) who is under age 18 (or a student who is at least age 18 and under age 24 and whose earned income does not exceed one-half of his or her own support), (b) who has at least one living parent, and (c) who does not file a joint return.
Do I qualify for the American Opportunity Credit?
Eligibility requirements
- The student must be you, your spouse, or a child whom you claim as a dependent on your tax return.
- The credit can only be claimed for the first four years of post-secondary education.
- The student must be pursuing a degree, certificate, or other recognized credential at an Eligible Educational Institution.
- The credit is only available for four tax years.
- The student must be enrolled at least half-time for a minimum of one academic period during the tax year.
- The academic period must begin either during 2017 or during the first three months of 2018.
- You must pay the expenses during 2017.
- You can pay expenses with a loan, including low-interest student and government subsidized loans, but be sure to deduct the expenses rather than the loan payments.
- Qualified education expenses include tuition and "course materials." For this purpose, the term "course materials" means books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.
- Courses must be taken at an eligible educational institution. Check with your school to see if they are eligible to participate in a student aid program administered by the Department of Education.
Limitations of this credit
- You cannot claim this credit if you are claimed as a dependent on someone else's return
- If you are married, you do not qualify if your filing status is married filing separately.
Your modified adjusted gross income should be less than $90,000 or $180,000 for married filing joint.
- You cannot take the American Opportunity Credit for expenses you paid if you claimed them for the Lifetime Learning Credit, Tuition and Fees Deduction, or job-related expenses.
- You cannot claim expenses that you paid with tax-free money from an education savings account (ESA) or qualified tuition program (QTP), such as a Section 529 Plan. When you take a distribution from an ESA or a QTP, part of it is from your original contribution and part of it is from earnings on the account. You cannot claim expenses paid with the tax-free earnings, but you can claim expenses paid with money from your original contribution.
- You cannot claim expenses that you paid with a tax-free scholarship, fellowship, grant, or employer tuition assistance. If you paid taxes on the tuition assistance (the tuition assistance appears on your W-2), you can claim the expenses.
- You cannot deduct meals, lodging, insurance, transportation, or other personal expenses
- You cannot deduct courses for sports, games, hobbies, or non-credit courses (unless they are part of the student's degree program).
- The student must not have a felony drug conviction as of the end of 2017.
Special circumstances or exceptions
- If one parent claims the child as a dependent and the other pays the education expenses, the parent who claims the student as a dependent also claims the credit.
- If the student withdraws from the classes, you can still claim the expenses if they were not refunded when the student withdrew.
- If expenses were paid with a loan, including low-interest student and government subsidized loans, you can still deduct them. Be sure to deduct the expenses rather than the loan payments.
- Students can claim eligible education credits when their parents don't claim them as a dependent. However, the student must have enough taxable income and resulting income tax to be able to deduct the credit from his or her taxes due.
What paperwork do I need for the American Opportunity Credit?
For your records, you'll need to keep the following:
- Form 1098-T, Tuition Payments Statement. Educational institutions issue this form.
- Any canceled checks or receipts that show your payment for the qualifying expenses.
- Any other documentation showing enrollment status and tuition and fees paid.
Deductions and credits related to the American Opportunity Credit
- Lifetime Learning Credit
- Tuition and Fees Deduction
- The Hope Credit is no longer available
- Student Loan Interest Paid Deduction
