AOTC and 529 plan question

[nan68]

I paid my daughter's college tuition with money from 529 plan. She is in her first year as a CMU student. I am not qualified for AOTC because my income is over the limit ($180,000). But Turbo tax did that part correctly (I do not get any AOTC). But when processing the 529 distribution, it assumes I used $10,000 to qualify for AOTC and considered I have excess distribution of $10,000. Thus, a proportional amount of the earning portion of my distribution becomes taxable income? How do I fix that?

[hbl3973 · Accepted solution]

nan68,

Great question!  You are right, TurboTax should not have attributed the $10,000 to the American Opportunity Tax Credit in your situation.  The easiest way to handle this is to go into the 1098-T area and use the Other Educational Expenses option to enter the distribution amount as going to Room and Board.

[nan68]

That solved my problem this time. But is there a way to file a bug on this? If I did not pay enough attention to detail this time, I could have missed it. I'd hope TurboTax could fix this bug soon.

[KrisD15 · Accepted solution]

When you select "Maximize My Tax Break" you are allowing the TurboTax program to make the decision about what to claim for an Education Credit. 

You may type

letme

into the search-box to review the credit the program wants to take and also make changes to the allocation if desired. 

[hbl3973]

nan68,

I'll report it to the powers-that-be.  Happy to be of assistance.