Q. So I understood, If we pay any expenses (Tuition, Mandatory fees, room and Board etc., ) using 529 distribution that is not eligible for AOTC, right?
A. No.
That's not your issue. You are free to allocate expenses to any tax attribute (AOTC, 529 distribution, tax free scholarship) for the best tax outcome. But there's one exception; restricted scholarships must be used for the expenses mandated in the scholarship terms (usually tuition). So you can not claim the AOTC, based on the box 1 (of the 1098-T), if the scholarship is so restricted.
Q. If I enter 500 on the same screen, I'm not receiving anything. I was thinking it is 100% for first 2000 expenses. Please advise?
A. Yes, you should be getting a $500 credit. Enter at book expenses. Also enter room and board. Enter the 1099-Q before entering the 1098-T. You may have to delete and re-enter.
The interview is tricky.
Provide the following info for more specific help:
- Are you the student or parent.
- Is the student the parent's dependent.
- Box 1 of the 1098-T
- box 5 of the 1098-T
- Any other scholarships not shown in box 5
- Does box 5 include any of the 529/ESA plan payments (it should not)
- Is any of the Scholarship restricted; i.e. it must be used for tuition
- Box 1 of the 1099-Q
- Box 2 of the 1099-Q
- Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
- Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
- Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
- How much taxable income does the student have, from what sources
- Are you trying to claim the tuition credit (are you eligible)?
- Is the student an undergrad or grad student?
- Is the student a degree candidate attending school half time or more?
