I got a message from Turbo Tax that I was not qualified for American Opportunity Credit as my income was over 90k

[vickap]

I had unemployment income of over 10.2k.

When Turbo Tax calculates MAGI (modified adjusted Gross income) for American Opportunity Credit, does it add back the 10.2k for unemployment - disqualified for American Opportunity Credit if over 90k

(the 10.2k was excluded from unemployment for calculating Federal Tax).

[Opus 17]

There may be a bug in the program.  There is a list of items that the unemployment exclusion does NOT count for, under the law, but we think it should still count for the education credit.  Last update was 2 weeks ago that the product quality team was looking into it.  I posted a request for an update.  

[vickap]

Please let me know if TurboTax will make an update (I have CD version) before the deadline (May 17), otherwise I will have to file it manually or through another online filing company.

[macuser_22]

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@vickap wrote:

(the 10.2k was excluded from unemployment for calculating Federal Tax).

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Correct "federal tax" , but the American Rescue Plan  act specifically requires calculating MAGI for educational credits (and 6 others)  to use the MAGI before applying the unemployment exclusion.

[vickap]

I checked on the IRS website if I am eligible to claim an education credit and it did confirm that I was eligible to claim the American Opportunity Credit (reduced amount, not full). This used AGI (not MAGI).

https://www.irs.gov/help/ita/am-i-eligible-to-claim-an-education-credit

It is not very clear.  In the Student Information Worksheet, Part III Line 1. It says "Is this student qualified for the American Opportunity Credit" No. Reason is "Income exceeds $90000"

In 1040 Line 9 the total income (AGI)  is below $90000.

Is there a place in TurboTax where the MAGI is calculated?

MAGI which is used for calculating the educational credits - does it include the $10.2k  unemployment exclusion or not.

[rjs]

To clarify the rules: Under the American Rescue Plan Act, the income calculation is not the same for all of the education benefits.

The unemployment exclusion is not added back when calculating MAGI for the education credits: specifically the American Opportunity Credit and the Lifetime Learning Credit.

The unemployment exclusion is added back when calculating MAGI for the education deductions: specifically the Tuition and Fees Deduction and the Student Loan Interest Deduction.

TurboTax apparently adds back the unemployment exclusion for the two credits, as well as for the two deductions. So the calculation in TurboTax is correct for the two deductions but it is wrong for the two credits.

[vickap]

So does that mean I should be qualified to receive this Credit for the American Opportunity Credit.

If so, will TurboTax make an update to resolve this.

[vickap]

I tried to call the customer support three times yesterday, but either I was cut off and or failed to get a call or be connected to the right person.

I also called the IRS customer support agent who confirmed that I am eligible to receive the American Opportunity Credit.

Could Turbo Tax confirm that I should receive the American Opportunity Credit.

[rjs]

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@vickap wrote:

Please let me know if TurboTax will make an update (I have CD version) before the deadline (May 17), otherwise I will have to file it manually or through another online filing company.

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The latest feedback from TurboTax suggests that this is not going to get fixed before the May 17 filing deadline.

[vickap]

Thanks for your reply.

Is it better to file extension as it is unlikely to be fixed before May 17.

[rjs]

@vickap  Yes, you should file an extension.

[vickap]

Is there an approximate date when turbotax would be updated with this change.

[rjs]

They have not provided a time frame.

[rjs · Accepted solution]

This bug appears to be fixed in today's TurboTax update (June 10, 2021). If you are using TurboTax Online it has been updated automatically. If you are using the CD/Download TurboTax software be sure to install the latest update.

[vickap]

Thanks for letting me know. I applied the update and now the American Opportunity credit is reflected in my Federal Return.