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education tax credit

Based on College Student Information, I qualify for the AOC.  My 1098-T has tuition ($9811) and Scholarship ($10,750).  Qualified Education expenses total ($959) so expenses and tuition equal $10,770.  TurboTax says that I don't qualify for AOC because "net qualified education expenses is zero".   Expenses were > scholarship, albeit by a small amount.  Why don't I qualify?

2 Replies
Level 15

education tax credit

are you the dependent of someone else? are you in grad school? did you use AOTC for 4 prior tax returns?  are you a drug felon (not kidding, that was one of the questions.)


go back to all the questions TT asks, and ensure you answered everything correctly. 

Level 15

education tax credit

What constitutes your  $959 of "Qualified Education expenses"?   Look at the Student information worksheet. Is the $959 showing up in the AOC column.  

The AOC is limited to being claimed 4 times in your undergrad career.  Do you really want to waste one of those times on a $20 credit (maybe only a $8 credit, depending on your tax liability).  The AOC is maximum $2500. 


There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent claims that credit. 

You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.


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. 



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