If I use a Coverdell ESA to pay for school, am I able to receive the American Opportunity Credit.

Forum|Forum|6 years ago
June 5, 2019
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TurboTax Free Edition Online

Fern

Employee

The American Opportunity or Lifetime Learning Credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses aren't used for both benefits.

This means that qualified higher education expenses are reduced by
1) tax-free educational assistance (scholarships and grants), and
2)any expenses paid by a Coverdell ESA distribution

Any remaining expenses can then be used to calculate the American Opportunity or Lifetime Learning credit.

taxmom99

Why, then, is Turbotax calculating that we qualify for the American Opportunity Credit, when the amount on the 1098-T were paid for with Coverdell funds? Is that an error?

VictorW9

Taxpayers may claim the AOTC in the same year a tax free distribution is made from a Coverdell as long as there is no double-dipping. Different expenses must be used to justify the AOTC and a tax free distribution. from a Coverdell. If the distribution was used for room and board that is not covered by the AOTC, then the credit can be taken.

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