Hello I was asked to choose a number for the large education credit and I am confused on what to enter and how to enter an accurate number?

Forum|Forum|1 year ago
April 13, 2024
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I was asked this after entering all my information as a recipient for the 529 plan. It's asking that in my case I can provide a maximum education credit of $4000 in my case or to either put a number between 2,650- 4,000 to receive the best results or enter 0 to treat this as non-taxable. If i could just get more information on this and help me understand this concept better so I can enter this information accurately.

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AmyC

Employee

The 529 goes to room and board along with tuition, book, etc. If all of it was used, it is not taxable and not entered. Unless you want some of it to be taxable. It is best to have the 529 allocated to room and board, or other expenses, if possible.

To receive the AOTC credit, you must have spent money on tuition that isn't tax free. Which could mean making some of your 529 taxable.

Example:

$15,000 529 distribution. $12,000 went to room and board with $3,000 towards tuition, books, etc.
1098T shows $12,000 tuition. Plus you have additional expenses of $1,000 for books and miscellaneous.
The 529 paid $3,000 towards the tuition and books. If we subtract the $3,000 from the amount paid for tuition and books, we have $13,000- $3,000 = $10,000 actually spent out of pocket.
Any amount over $4,000 for tuition expenses paid out of pocket is extra, not needed for calculating the AOTC.*
In this case, the 529 does not affect your AOTC. Delete the 1099-Q.

*The AOTC is worth up to $2,500 per student for the first $4,000 you spend on qualifying educational expenses on behalf of you, your spouse, or your dependents.

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Hal_Al

Employee

Provide the following info for more specific help:

Are you the student or parent.
Is the student the parent's dependent.
Box 1 of the 1098-T
box 5 of the 1098-T
Any other scholarships not shown in box 5
Does box 5 include any of the 529/ESA plan payments (it should not)
Is any of the Scholarship restricted; i.e. it must be used for tuition
Box 1 of the 1099-Q
Box 2 of the 1099-Q
Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
How much taxable income does the student have, from what sources
Are you trying to claim the tuition credit (are you eligible)?
Is the student an undergrad or grad student?
Is the student a degree candidate attending school half time or more?

beaubien24Author

I am the student and I am an undergraduate student attending more than half-time and seeking to claim the tax credit. I am not a dependent anymore. My box 1 for my 1098-t is 14,601.68. and my box 5 is $1500. There are no other scholarships shown in box 5 and also 529 payments were not used for this. For the 1099-Q my box 1 is 12,164.74 and box 2 is 2,936.89. The student is the recipient on the 1099-q but the parent ss# is on the form. The student is living off-campus and the other qualified expenses like books and materials are around $500 which the student pays for.