The education section in the program may tax the
distribution if the credit is worth more than the tax on the distribution. You
have the option of changing this if you'd like to. If the 1098-T is entered
first in the program, the expenses will be applied to a credit, and you need to
change that allocation manually.
Return to the "Education Information" sections and
re-answer the interview question to get to the screen that asks how much of the
expenses to allocate to the credit.
1. Go back into
Expenses and Scholarships (form 1098-T) under Deductions & Credits
and click Edit
2. Click Edit next
to the student's name and continue until you get to the "Here's
Your Education Summary" screen (see screenshot) NOT "YOUR
EDUCATION SUMMARY SCREEN" move forward from there to "Here's your
Education Summary"
3. Scroll down on this page and click Edit next
to Education Information (see screenshot)
4. Continue through the
interview questions and the last screen will ask how much you want to allocate
to the credits (see screenshot)
This screen reports the total amount of expenses you have to
work with. If you do not want any of the distributions taxed, subtract
the distribution amount from the total education expense and enter the
difference. For instance, 10,000 expenses, 8,500 distributions, enter 1,500
and continue. You can also see how the change affects your refund/tax
liability. If you are not eligible for any credits because of income limits,
you can change the allocation to zero.
