turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Alde
Returning Member

College tuition expense

I entered 1098-T data for Box 1 tuition and Box 5 grants no different than I have done in prior years. Was not expecting to qualify for the education tax break and I did receive  the message that I can’t claim the education tax break. 
There was no change to the federal return, but the net tuition expense flowed  to Line 11 (college tuition deduction) on Schedule Y of my Massachusetts return and Line 15 on Form 1. Thus decreasing 5% Income and less taxes owed. This has never occurred in prior years of using Turbo Tax. It was always $0.

I also compared my  ‘23 return to prior years and all education data was entered identical. My tuition payment is less than  25% of adjusted gross income. It’s in my favor, but it doesn’t look right. Does anyone have any suggestions?

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

2 Replies
KrisD15
Expert Alumni

College tuition expense

You are correct when you say the payments must be at least 25% of your Massachusetts Modified Adjusted Gross Income.

The Massachusetts MAGI is not the same as the Federal MAGI. 

Did your MA income change or do you have adjustment on Schedule Y 1-10 that you did not have (or increased from) prior years since that would affect the Massachusetts MAGI.

 

HERE is a link to computing Massachusetts MAGI. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Hal_Al
Level 15

College tuition expense

"I entered 1098-T data for Box 1 tuition and Box 5 grants no different than I have done in prior years. Was not expecting to qualify for the education tax break and I did receive  the message that I can’t claim the education tax break. "

 

There is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.

 

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do the “loop hole”.

 

The way you enter this in TurboTax (TT), when asked if any of the scholarship paid for room & board, in the parent’s interview, enter $6000 (in the 1st  example above).

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies