Education

Thanks so much!!!  This is really exciting!!!

After going through the menus again in your post below, I was able to come to the screen, “Amount Used to Calculate the Education Deduction or Credit”.  I then entered the applicable $4000 amount for the AOC credit and it populated the Student Information Worksheet, Part VI, Education Expenses, Line 17 with the correct value of $4000 in place of the previously incorrect $10,000 value.  

What is very interesting is that the first time you go through and enter the Tuition information, that screen does not show up, so the user doesn't know that entry even exists.  Then after entering the 529 information, and TurboTax using (in my case) some incorrect internal logic, it decides there was an excess distribution on the 529.  Only then can the user go back through the Education Expense screens and get to that screen "Amount Used to Calculate Education Deduction or Credit".   So, it is important to know that screen comes and goes depending on whether the 529 exceeds the tuition expenses or not.  

I also found that if you have the correct $4000 amount set for the deduction on that screen and there is no excess penalty, and then you subsequently go back into that screen, TurboTax states:

We'll make this entry zero that's no longer needed. 

Earlier you told us to treat $4,000 as a taxable education distribution in order to claim a larger education tax credit. However, it's no longer beneficial for any amount to be treated as a taxable distribution and used for an education credit. so we'll just make this entry zero. 

It changes the value to zero and the user is no longer able to go back in and change the value.   It shows as zero on Line 17 of the form, even though the user is still receiving a $4000 AOC deduction.  At that point, the user cannot go back and change the value.  The user actually has to either reduce the education expenses or increase the 529 distribution for TT to again register an excess distribution scenario in order to be able to get access to that screen again.

The bottom line is that once you go in and set the value to the way that you want, it is best to not go into that "Education Information" screen again.  Otherwise, Turbo Tax may set the value to zero again.  Now, I understand why possibly on previous year's forms that value was set to zero.   Ideally that screen should always be there with the default value populated for the AOC credit, and instructions for the user as to why they might want to reduce that value.  

It's also very important to double check the value being used on Line 17 of the Student Information Worksheet, Part VI, Education Expenses to be sure the correct value is being used, and also check lines 20 and 29 that the correct AOC credits are being applied.   Go to print center, and Print with "include government and TurboTax worksheets", to check the calculations on the Student Information worksheet.  I would also check the calculations in "Part VIII, Qualified Tuition Program (Section 529 Plan)"

That value (Amount Used to Calculate the Education Deduction or Credit) can also be used if for some reason you don't want to take the AOC credit in a given year.  It could be a situation, where the student attends undergraduate college for more than 4 years, and in some of those years, the AOC tuition credit ends up being lower than the others.  You're only allowed to receive the AOC credit 4X's, so you may want to elect not to take in some years, so that it can be used in a subsequent one.   That value can used to do that.  If you're in that situation, I suggest trying different values and be sure that you get the desired result. 

I am very happy that with the above understanding of this behavior, it resolves my problem.