I was expecting TurboTax (Premier) to tell me that I did NOT qualify for ANY education credits. Now I'm confused.
My son's 1098-T box 1 (qualified tuition & related expenses was $27,310 box 5 (scholarships & grants) was $33,646. The program asked if any scholarships were used to pay for room & board my answer was "yes" -- Total used? $6,336 (entire remainder of the scholarship) -- incidentally, I did kick in another $600 towards R&B that wasn't covered by scholarships but that's not irrelevant to my problem as I understand that to be my part of his nonqualified expenses (along with air travel to school & incidentals)
At this point, (on the next screen) TurboTax tells me that my son will need to include the $6,336 amount as taxable income. (I expected that) The very next screen, asks if my son paid anything for books, supplies & equipment to attend. I answered "yes" to this because I paid cash for his books $493 (not required to be purchased from the college bookstore-- why that matters is beyond me, but ok)
The list of deductions came up -- "Yes" to American Opportunity Credit. "NO" to Lifetime Learning Credit AND Tuition & Fees Deduction (Net qualified expenses equal zero on both) AGAIN, somehow I was expecting all 3 to be "NO" instead I was awarded a AOTC credit of $219.
As I move onto my son's return, is there something I need to do differently? It appears that the same questions are being asked even though he's a dependent on my return & as such, I understand he ultimately won't qualify for the credits. BUT?? With the $493 entered for books will the $6336 be reduced income? Would that outcome be right or wrong? Other relevant info -- He did NOT support himself but he does have work-study & part-time summer income of $3,000. He's 19 yrs old, & a freshman. I will be claiming earned income tax credit on him as a qualifying child. I normally wouldn't be too concerned about $219 but I fear the IRS (no joke)
I just want it to be done right! Maybe I should remove the educational part off my return? At this point I am confusing myself. Any answer to help clear my fog is deeply appreciated.
