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The reason you are seeing what you are seeing is due to how the AOTC works.  Although, the AOTC is $2,500, it consists of $1,500 NON-Refundable amount and up to $1,000 refundable amount (40% of your credit is refundable).  The AOTC is calculated as 100% of the first $2,000 and then 25% of the next $2,000.  So each student needs at least $4,000 in qualified expenses not covered by grants or scholarships in order to get the full $2,500.  Plus, you need to have enough tax liability to get the full non refundable portion.   So you have multiple things happening here on your return.     1) One student has less than $4,000 expenses after applying the scholarships and grants 2) Your tax liability is less than the total of the Non-Refundable portion of the AOTC which limits your non refundable credits.  3) Before entering the last child as a student, you are getting a portion of the $500 Non-Refundable Other Dependent Credit The easiest way to explain is by looking at your form 1040 and form 8863.   If you look at line 16, this is your tax.  Your tax amount on line 16 eats up the non refundable credits first.  So, with 3 students you have a total of $4,500 of non refundable credits from the AOTC to eat up what is on line 16.  So if line 16 is $3,000 then you would only use the $3,000 and the remaining $1,500 cannot be used because non refundable credits cannot reduce your tax below $0.     Also, if you remove one of the student expenses and look at line 19, you will see that you have a number in that line where you do not when you enter the third 1098T.  This is because with or without the AOTC, you get a $500 NON refundable credit for each of your dependents that do not qualify for the child tax credit.  Once they turned 17, they no longer qualified for the Child Tax Credit, it switched over to the Non Refundable Other Dependent Credit. So whether or not the third child is entered as a student, in your case, your total tax on line 24 is $0. This means any Non-Refundable credits that did not go to wiping out what is on line 16 are lost.    But at this point you are getting back all that you had withheld from your wages (box 2 of your W-2 or line 25d on your form 1040.  That amount is all going to be refunded to you.   This is where the refundable credit comes in. Each student is eligible for up to $1,000 of the refundable portion of the AOTC.  But the student with the highest tuition and scholarship is only able to receive $2,470 ($30 short of the full credit).   So if you did see the refund drop immediately after saying that she was a student, the software may have taken the Other Dependent Credit out in anticipation of the AOTC being larger than the Other Dependent Credit.  The refund meter changes a lot during your tax preparation. It is not an accurate number until EVERYTHING has been entered on the return.  What Is the American Opportunity Tax Credit?