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February 1, 2021
Question

Should Tuition Deduction option for student credit/deduction saves me the most money (4000) but turbotax defaulted to the American opportunity credit (2500)?

  • February 1, 2021
  • 1 reply
  • 0 views
Is it possible to select a different option? Should I change the deduction?

1 reply

Hal_Al
Employee
February 1, 2021

The $4000 Tuition & Fees Deduction (TFD) is only a deduction from income, before tax is calculated. For example, if you are in the 12% tax bracket, you save $480 ( 4000 x 12% = 480).

 

The $2500 American opportunity credit (AOC) is a dollar for dollar reduction in tax.  If you have less than $2500 in tax liability, you still get up to $1000 of that as a refundable credit (direct refund). 

 

So, it's not $4000 vs. $2500; it's only $480 vs 2500.