topic Form 8863: Education Credits ($160k to $180 Income Issues) in Deductions & credits

Form 8863: Education Credits ($160k to $180 Income Issues)

WorshipsTaxGods — Tue, 31 Mar 2020 04:51:45 GMT

Dear Tax Gods,

My understanding of Form 8863 (as of yesterday) is that with (2) children in college, I can claim/collect up to $5000 in education credits, $2500 per child. I know there are other nuances associated with allocation of education expenses with 529 plans "in-play" but I won't go into that.

For a family making $160,000, the full $5000 is available. For a family making $180,000, it drops to $0. Wow!

Coincidentally, my wife started working this year. I make around $155k. She makes around $25k, so total around $180k. So, I'm finding we don't qualify for any of the $5000 education credit.

The kicker is that I put aside $19,000 to a Roth 401k this year. Hypothetically, if I had made my contributions traditional 401k instead of Roth (which I had the option to do), this would have dropped my taxable income (which I knew about) and would at the same time qualified me for the vast majority of the education credit (which I did not know about). The second kicker is that I was actually making traditional contributions last year but because these are still taken into consideration for financial aid purposes (on CSS profile), I had decided to revert back to Roth 401k contributions.

Question: Assuming there are no issues with my understanding above, is there a pathway for me to receive this education credit, i.e. not get screwed.

Thoughtful responses would be much appreciated.

Re: Form 8863: Education Credits ($160k to $180 Income Issues)

DianeC958 — Tue, 31 Mar 2020 17:19:32 GMT

No, unfortunately with the amount of income you make, you do not qualify to receive the education credit.

The Lowdown on Education Tax Breaks

@WorshipsTaxGods

Re: Form 8863: Education Credits ($160k to $180 Income Issues)

WorshipsTaxGods — Wed, 01 Apr 2020 23:07:30 GMT

My point was that I would qualify if my 401k contributions had been traditional instead of Roth Type contributions because taxable income would be 160ish instead of 180ish. However, I did not make traditional contributions. Is there a way to reverse these?

Re: Form 8863: Education Credits ($160k to $180 Income Issues)

HelenC12 — Fri, 03 Apr 2020 17:21:05 GMT

No, there's no way to reverse this because 401(k) contributions would have to have been made, through your employer, in 2019.

The contributions would have shown up on your 2019 W-2.
Your employer can't go back and re-do all the payroll transactions to include your 401(k) contributions.
That would also mean your employer would have to refile all the payroll tax forms and give you a corrected W-2.
There also isn't a way to make the change in TurboTax, using the income tax forms.