Tuition & books paid directly to the school and they show on the 1098. Can I also put those amounts in the "Books and materials required to be purchased from the school"?

Forum|Forum|1 year ago
February 21, 2025
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Just trying to figure out why the AOTC isn't giving me credit for paying tuition.

Hal_Al

Employee

Q. Can I also put those amounts in the "Books and materials required to be purchased from the school"?

A. No, if they are already included in box 1 of the 1098-T. That would be entering that amount twice.

Q. Just trying to figure out why the AOTC isn't giving me credit for paying tuition.

A. Are you the student or the parent? The AOTC law was written "for parents". How much is in boxes 1 and 5 of the 1098-T? You generally can't claim tuition covered by tax free scholarship (there is a loop hole available).

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. 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 Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.

You cannot claim the (up to) $1000 refundable credit if you are, or can be, claimed as a dependent by someone else.

Reference: Line 7 instructions for form 8863.

https://www.irs.gov/instructions/i8863#en_US_2024_publink53002gd0e674

maglione04Author

Thank you for responding! I am the parent. Box 1 is $3010.70 and 5 is $5203.25. I thought that you got back 100% of the first $2,000.

Hal_Al

Employee

Q. I thought that you got back 100% of the first $2,000?

A. Yes, but normally not when box 5 is more than box 1.

But, as I mentioned, there is a way to get it.

There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You cannot do this if the conditions of the grant are that it be used to pay for qualified expenses.

Using your numbers as an example: Student has $5203 in box 5 of the 1098-T and $3011 in box 1. At first glance he/she has $2192 of taxable income and nobody can claim the American opportunity credit. But if she reports $5203 as income on her return, the parents can claim $3011 of qualified expenses on their return.

If that $5203 is his only income, he will not pay any tax.