1098-T Eligibility

Forum|Forum|3 years ago
April 4, 2023
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Not A Product Question

Best answer by AmyC

Since your parents are paying with money that has not been taxed by the U.S., you will not be able to claim the credit. The IRS states:

Expenses Cannot Be Paid with Tax-Free Funds

You cannot claim a credit for education expenses paid with tax-free funds. You must reduce the amount of expenses paid with tax-free grants, scholarships and fellowships and other tax-free education help.

Your answer from the IRS about limited is trying to explain that you may be able to get benefits up to the amount of your tax liability but nothing additional. The program asks many questions but to answer correctly you need a lot of background information. It sounds like you have done a lot of work!

AOTC is only good for 4 years and covers books and additional items so it is the better credit.

Reference: Publication 970, Tax Benefits for Education

AmyCAnswer

Employee

Since your parents are paying with money that has not been taxed by the U.S., you will not be able to claim the credit. The IRS states:

Expenses Cannot Be Paid with Tax-Free Funds

AOTC is only good for 4 years and covers books and additional items so it is the better credit.

Reference: Publication 970, Tax Benefits for Education

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cucumberwindiceteaAuthor

thank you!

about AOTC as a "better credit"... this is not related to fact that I'm not eligible for both AOTC and LLC, correct?

Hal_Al

Employee

Q. About AOTC as a "better credit"... this is not related to whether I'm eligible for either AOTC and LLC, correct?

A. Correct.

The AOTC is 100% of the first $2000 tuition and other qualified expenses paid plus 25% of the next $2000 (it only takes $4000 of expenses to get the maximum $2500 credit). The LLC is 20% of of Tuition paid, up to $10,000 (maximum $2000 credit)

Hal_Al

Employee

If you are a Resident For Tax Purposes, you are eligible for the non refundable portion of both the AOTC and LLC ("limited by your tax liability and other non-refundable credits").

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 Tax Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants.