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American Opportunity Credit Form 8863

IBMom2UIBMom2U Posts: 51Registered User Junior Member
Hello,

I am completing Form 8863 and we are eligible for this credit. The online software I use figures the credit at just under $3000 (yay!), but it is including in the qualified expenses section the Stafford Loan ($1,742) that the university credited on my son's statement on 1/6/12.

Can I still include the Stafford Loan for 2011 even though the college credited it in 2012?
The software does not appear to let me back out this amount and only uses the numbers on the 1098-T.

Thank you!
IBMom2U
Post edited by IBMom2U on

Replies to: American Opportunity Credit Form 8863

  • emeraldkity4emeraldkity4 Posts: 32,817Registered User Senior Member
    For some reason the online software says we are not eligible & I don't know why.
    Income is well under maximum ( using tax act)
  • IBMom2UIBMom2U Posts: 51Registered User Junior Member
    I guess it doesn't hurt to try another program--the one I used is FreeTaxUSA.com. I may just answer one of the questions incorrectly to lower the qualified expenses. That seems to be the right thing to do since the 1098 T does not include the Pell grant credited on my son's 1/6/12 statement. My son's university uses amount billed not amount paid.
  • swimcatsmomswimcatsmom Posts: 14,942Registered User Senior Member
    The online software I use figures the credit at just under $3000 (yay!),
    The maximum American Opportunity tax credit is $2500 per student (100% of the first $2000 qualified expenses and 25% of the 2nd $2000), so I'm not sure how the program comes up with $3000 credit (assuming you have just one student).
    but it is including in the qualified expenses section the Stafford Loan ($1,742) that the university credited on my son's statement on 1/6/12.

    Can I still include the Stafford Loan for 2011 even though the college credited it in 2012?
    The software does not appear to let me back out this amount and only uses the numbers on the 1098-T.

    I'm confused by this. The stafford loan is not relevant as far as the AOC and is not included anywhere. What matters is the qualified expenses for 2011 and whether any other tax benefits were taken using those expenses. For instance if a qualified expense was paid for with tax free scholarship/grant money or with 529 funds (that you took the tax benefit for), you can't also use that expense to claim the AOC. Also remember the 1098 does not include all expenses that may be used for the AOC. For instance books will not be listed on the 1098 but are qualified expenses for the AOC. If you paid for qualified expenses out of pocket or with loans, then they are eligible for the AOC.
  • swimcatsmomswimcatsmom Posts: 14,942Registered User Senior Member
    For some reason the online software says we are not eligible & I don't know why.
    Income is well under maximum ( using tax act)
    Check that you answered all the questions correctly - student is half time or more, is a candidate for a degree, has not already completed 4 years of school etc.

    The IRS publication for the AOC is IRS 970. Check there that you meet all eligibility.

    I have found I have had to tweak how I input information sometimes as the software programs do not get it all correct, so reading IRS970 to make sure you understand all the rules is beneficial.
  • IBMom2UIBMom2U Posts: 51Registered User Junior Member
    Swimscatmom,

    Thanks for your help. My mistake, total REFUND is just under $3,000, AOC seems to be $2369 if I use the 1098T. The amount billed or qualified tuition and related expenses is $14,534 and scholarships and grants are $11288. But I did not pay $14,534 because included in the amount billed on the 1098T, I believe, is the $1,742 Stafford Loan credit received by the school in January 2012.

    I am the first to say I find this very confusing, but since the Stafford Loan is a loan I thought I could claim that as an amount I pay. In this instance I thought I should claim it as an amount I will pay in 2012 since 2012 is when the college received it although they billed it in November 2011.

    I really wish the school would complete Box 1, payments received for qualified tuition and related expenses. It seems that would be more straightforward.

    I appreciate any clarification and/or pointers as to how I may not be looking at this the right way.

    The software did prompt me to include books.....
  • emeraldkity4emeraldkity4 Posts: 32,817Registered User Senior Member
    Oh I figured it out.
    But this question is confusing.

    Did not have expenses that were used to claim the Hope credit or American opportunity credit in
    any 4 total prior tax years.

    She has been in school for two years- if I don't check it- it doesn't give me the credit, but if I do check it, it does.

    Am I just dense?
  • 34collegemom34collegemom Posts: 28Registered User New Member
    "Oh I figured it out.
    But this question is confusing.

    Quote:
    Did not have expenses that were used to claim the Hope credit or American opportunity credit in
    any 4 total prior tax years.

    She has been in school for two years- if I don't check it- it doesn't give me the credit, but if I do check it, it does.

    Am I just dense?"

    emeraldkity4 - The Hope & AOC can only be used for 4 years combined. Since your d has only been in school for 2 years, then she has NOT had expenses for 4 years, and you WOULD check the box (don't let your eyes skip over the NOT in the question). It means you did NOT claim the Hope/AOC credit already for 4 TOTAL years.
  • MomCat2MomCat2 Posts: 701Registered User Member
    There was a previous question as to whether amounts paid by a loan (for qualified educational expenses) qualify for the American Opportunity credit. YES they do:
    (From Pub. 970):
    Paid with borrowed funds. You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the
    American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational institution
    as paid on the date the institution credits the student’s account.

    Even if the loan is in the STUDENT's name (such as a Stafford loan which is part of the financial aid package) you, the parent, can count that amount towards the AOC (as long as the student is your dependent for tax purposes, of course):
    Note. Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party, are considered paid by you.

    The instructions for form 8863, the AOC credit, go into more detail on this:
    Generally, qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you are treated as having paid
    expenses that were paid from your dependent student’s earnings, gifts, inheritances, savings, etc. For more information and an example, see Who Can Claim a Dependent’s Expenses education expenses in Pub. 970, chapter 2 or 3.
  • njfootballmomnjfootballmom Posts: 504Registered User Member
    This gets so confusing....I have finally just decided to go with the amounts billed box and put that amount. It all comes out in the end. S1 transferred from CC to State Univ this year. The 1098 from CC is basically only for one semester because spring was billed the year prior, and in fact we probably paid for one and a half (for spring we paid half in'10 and half in'11, and we paid for fall in '11) we also paid for spring '12 at the new school, but paid it in '11 before he ever took a class there. Since his new school is 10k/yr it won't matter because we will be over the max....It's so hard to track when you paid, when the loan paid, when the bill came, it's crazy. We clearly were billed or paid well over the minimum amount to get he whole 2500 so.....If the IRS wants to come and sort out what was paid when over the 4 years I will gladly meet with them!

    so, right or wrong (probably wrong but I am too tired/stupid/lazy to break it down precisely) that is how I did it, by whatever is on the 1098, plus books for the calendar year.

    Good info on the 529 and grandparent payments. Also, 529 funds are allowed to be claimed if they are part of the initial investment. The savings on 529 is on the treatment of the earnings, so if earnings are used the earnings amount can't be claimed. Based on what the stocks have done in the past years, I'd say we are using principal now. Also, can't you say you are withdrawing principal first? That way, it they phase out the AMOC, it won't matter. That is there might not be a credit to worry about claiming. That is, by the time we are spending the "earnings" there might not be education tax credits to decide between in the tax treatment of the earnings vs claiming a credit. Does that make sense how I explained it?
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