Don't want to take the AOTC, but still want to count QHEE against 529 Plan distribution

mkaprelian · ‎June 6, 2019

My son took a few classes this year at a community college, and paid for them from his 529 plan. Although he is eligible for the American Opportunity Tax Credit and Turbotax understandably suggests that he take it, he doesn't want to use up a year of eligibility when qualified education expenses were so low. We've managed to override the AOTC selection, but when we do that, the program does not subtract his QHEE from his 529 distribution, instead treating the distribution minus basis as taxable income. We should be able to fix this, right? But how?

KrisD · ‎June 6, 2019

Go back to the "Education Information section on the "Here's your education summary" screen.

Click Federal,

Deductions & Credits,

scroll down to "Education",

scroll down to "Expenses and Scholarships (Form 1098-T)",

Click Edit next to the student's name, continue through the interview to land on the "Here's you education summary screen".

Scroll down on this screen to the last option "Education Information" and click Edit.

Go back through the interview and on the last page should be the amount allocated to a credit.

Change it to to only the amount over the distribution (if you take the Lifetime Learners credit) or 0.

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mkaprelian · ‎June 6, 2019

Thank you. That works.