1099-Q and 1098-T result in incorrect adjusted qualifying expenses for AOC

[MrBadStink]

I'm using TurboTax Premier 2023 (desktop/PC version).  In the Deductions and Credits section under the Education category, I entered Form 1099-Q values and Form 1098-T values (including Other Education Expenses such as books, room and board etc not reported on 1098-T).

A page titled "Next, We'll See Which Credit Will Save You the Most" appeared and said my return qualifies for the American Opportunity Credit and for Lifetime Learning Credit.  But after I clicked the Maximize My Education Tax Break button, the analysis said Maximized Savings would be achieved via the American Opportunity Credit in the amount of $2500.

When I reviewed the TurboTax Student Information Worksheet for my dependent student, in Part VI -Education Expenses it incorrectly assigned $10000 to the "Adjustments: Used For Credit".  The amount it should have assigned is $4000 because that is the amount that of expenses that were used to calculate the AOC credit of $2500 for my return.  The $10000 amount would have been correct only if the Lifetime Learning Credit was used instead of the American Opportunity Credit.

This TurboTax error is resulting in an extra $6000 of taxable 529 distributions in Part VIII Qualified Tuition Program.

[Hal_Al · Accepted solution]

Try this:

Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it to $4000.   You may reach that screen sooner.