AOTC for senior year and graduate school

Forum|Forum|4 years ago
July 22, 2021
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I have a question about the "how-to" process of getting TurboTax to allow my daughter to claim the AOTC. I'm just doing this in advance for 2021 taxes using TurboTax 2020 as a proxy for how it will work.

Our situation is this:

My daughter graduated this spring after four regular years of college, so prior to 2021 she has not completed four years of college.
She started graduate school this summer/fall.
We've claimed the AOTC only once (or maybe twice) in the years she was in college.

I created a test return using TurboTax 2020 and if I ONLY enter her undergrad 1098-T, she qualifies for the AOTC. If I check the box on the graduate school 1098-T for graduate school, it says she no longer qualifies because she has "Already completed four years of college". If I uncheck that box or remove the graduate school 1098-T, then it properly shows that she qualifies for the AOTC.

To me, this seems like a bug in TurboTax, because being in graduate school in the same year as finishing undergrad doesn't seem like a disqualifying reason for not receiving the AOTC.

Is there something I'm missing? Is there some place in TurboTax to indicate how many times the AOTC has been claimed?

This question, answered by @klehnhardt, seems to be similar, but TurboTax doesn't seem to actually allow this to happen.

Hal_Al

Employee

Corrected 8-9-21:

See this FAQ Q13 from the IRS website. Depends on the facts:

https://www.irs.gov/newsroom/american-opportunity-tax-credit-questions-and-answers

For others reading this: the AOTC is limited to being claimed four times. Since graduation year is typically the 5th calendar year for most BA/BS students, most students in this situation are limited to claiming the LLC.

cheitzigAuthor

Thank you. Yes, I understood that only the undergrad expenses would qualify for the AOTC.

Is it fair to say then that it might be a bug in TT that when I add the grad-school 1098-T, the AOTC goes away? Or, perhaps TT is making an assumption about grad school post senior year that is valid for most people (i.e., to your point, most people would've already gotten their 4 AOTC's before the spring semester of their senior year).

For purposes of testing, the only things in the return are either one or two 1098-T's. When I add the undergrad 1098-T, the AOTC @ $1,000 shows up as a refund. When I add a second 1098-T and mark it as graduate school, the AOTC form (8863) goes away and the refund goes to $0.