Question Regarding American Opportunity Credit

[Francisco2019]

Good Evening, My question is about if I'm eligible claiming American Opportunity Credit. So, I goto College at New York City. I Receive both Fafsa and Tap combined about $5,500 per Semester. My Tuition per semester is about $2,700-2,800. I didn't know about this credit. So I made majority of school qualifying spendings in cash. Which I have to take out about $1,800-1,900 out of my pocket. But I don't have saved receipt for other spending beside I only have one receipt that I kept is the $1,800-1,900. Could I claim that $1,800-1,900 Tax credit. If I do Would it rise a red flag for IRA for audit. Also, my school didn't provide 1098T.

[gloriah5200]

If your school does not provide 1098-T, then it may be that they are  not an "eligible institution".

Eligible educational institution.

An eligible educational institution is generally any accredited public, nonprofit, or proprietary (privately owned profit-making) college, university, vocational school, or other postsecondary educational institution.

Also, the institution must be eligible to participate in a student aid program administered by the U.S. Department of Education. Virtually all accredited postsecondary institutions meet this definition.

The educational institution should be able to tell you if it is an eligible educational institution.  You need to confirm this with your educational institution.

Please see the following:

IRS Publication 970, Education Expenses

Form 1098-T.

Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by February 1, 2021 (January 31 falls on a Sunday).

An institution will report payments received (box 1) for qualified education expenses. However, the amount on Form 1098-T might be different from what you paid. When figuring the credit, use only the amounts you paid or are deemed to have paid in 2020 for qualified education expenses.

Specific Instructions for Institution Filing Form 1098-T

File Form 1098-T, Tuition Statement, if you are an eligible educational institution. You must file for each student you enroll and for whom a reportable transaction is made. Also, if you are an insurer, file Form 1098-T for each individual to whom you made reimbursements or refunds of qualified tuition and related expenses.

Exceptions.

The educational institution does not have to file Form 1098-T or furnish a statement for:

• Courses for which no academic credit is offered, even if the student is otherwise enrolled in a degree program;

• Nonresident alien students, unless requested by the student;

• Students whose qualified tuition and related expenses are entirely waived or paid entirely with scholarships; and

• Students for whom you do not maintain a separate financial account and whose qualified tuition and related expenses are covered by a formal billing arrangement between an institution and the student’s employer or a governmental entity, such as the Department of Veterans Affairs or the Department of Defense.

For Additional information refer to IRS publication 970

[Francisco2019]

I Think I didn't receive the 1098T is because my financial aid fully covers my tuition and I get back refund. My school is a eligible institution. So, could I still claim for the credit because I made purchases with cash and no receipt is saved. The only prove I have is a $1,800 transaction I made to school. So would I be able to claim that $1,800 credit. 

[KrisD15]

If you get financial aid to cover your tuition AND you get the excess refunded, you might actually need to report income for that financial aid. 

Only scholarships and grants used for tuition, fees, book and supplies can remain tax free. 

I think you might need to retrieve your 1098-T online. Look at your student online account to see if it is listed. 

You could use that 1,800 credit if you subtracted the financial aid you were refunded from that amount or perhaps claim the refunded aid as income and the 1,800 as an expense, but you better check for that 1098-T first.   

[Francisco2019]

I did check it shows You do not have any 1098-T Data available.

[KrisD15]

You could recreate one with your student statement, but you'd need to know what you're doing. 

Contact the Financial Aid office and ask for assistance, it's their job to help you. 

[Francisco2019]

Thank You, Last question: I just sent in a email requesting for 1098T form which I don't know if they will give it to me. But if I do get it. Since I don't have proof of my qualifying educational expenses for my financial aid refund. what I can do is report the financial aid refund as income and the $1,800 I paid the college as a expense to claim for the American opportunity credit. Is this right? or is there any other ways that I can get a higher benefit?

[LinaJ2020]

It depends.  If your financial aid covers all your tuition amount, you do not qualify for a tax break.  You can still claim a credit of deduction if you paid for any books and supplies.  On your Form 1098-T, your qualified education expenses including tuition should be in box 1.  Box 5 is your scholarship or financial aid amount.  If you do not receive your Form 1098-T, you can still claim the credit or deduction by entering these two numbers plus any books and supplies you paid out of pocket. 

Per IRS, when you receive a scholarship or financial aid that fully covers your qualified education expenses, it is like a wash.  You do not get any tax break.  If your scholarship does not cover all of your education expenses, you may still claim either a credit or deduction on the portion you pay out of pocket.  However, if your scholarship exceeds your education expenses, the difference will be treated as wages added on line 1 of your Form 1040.  If you meet certain requirements, you may qualify for an education tax break including the American Opportunity Tax Credit AOTC, Lifetime Learning Credit or Tuition & Fees deduction. To see if you qualify, here are the links: 

Qualified expenses

Deductions

Credits

@Francisco2019

[daa]

Hi! i did not receive a 1098t. i received financial aid which covered tuition but i paid for qualified expenses out of pocket which i'd like to enter to receive credit. idk how to answer the question: did you receive Scholarship or Grant in 2021? Let us know if you got a scholarship, grant or any of these other types of aid: Fellowship Employer-provided assistance Veterans' education benefits Other tax -free assistance. is financial aid considered any of the above as asked in the question? thank you!

[AmyC]

No. Financial aid can include loans which do not count against expenses since they must be repaid. Your college is not required to mail the 1098-T. Check your bursar account. You should have a 1098-T. The form includes tuition and scholarships.

[daa]

thank you for the quick response!