My son graduated from college in 2024 and is trying to use the "loophole" suggested by the IRS in Pub 970 to take advantage of the American Opportunities Credit (AOC) even though he had a substantial scholarship. He is trying to increase his taxable scholarship income by $1,700 (he has $300 in book expenses) in Turbo Tax so as to be able to claim $2,000 in AOC. From what I have read, it appears that he does qualify to take the AOC (he supported himself from earned income, he was a full-time student before graduation, no one has claimed his AOC for 4 years, he doesn't have any convictions, etc.).
This is his information:
Earned Income per W-2 = $47,000
Dividend Income = $1,000
Tuition per 1098-T = $8,000
Scholarship per 1098-T = $23,000
Qualified Expenses (books) = $300
No matter how he has tried to increase his scholarship income and qualified expenses in Turbo Tax he gets a message that he is not eligible for an education credit. Turbo Tax says the reasons why he may not qualify are:
Somebody else can claim him as a dependent
Scholarships exceed educational expenses
There were no no net qualified educational expenses
How does he enter this information into Turbo Tax so it will make $1,700 more of his scholarship taxable and allow him to take $2,000 of the AOC?
