Education tax question and turbotax question

Parent Cafe
1

  1. Can my daughter claim the AOC and exemption if I don’t claim her as an dependent? She does NOT provide more than 50% of her support.

  2. Also I/she want to declare an additional part of her scholarship as taxable so there are expenses for AOC. What is the best way in TurboTax to do this. The only way I found was to adjust the 1089-T.

2

Here is the information you need. Yes it takes a while to read through it, but you probably need to. http://www.irs.gov/pub/irs-pdf/p970.pdf

And if you don’t absolutely need to use TurboTax because it’s the only way to be sure you’ve accounted for every thing you need to account for, try doing your taxes by hand. That way you can make any adjustments you need to a bit more easily.

3

She cannot claim the refundable part of the AOC if she does not provide more than half of her own support from earned income if she’s under 24. So no.

4

You don’t get a choice of whether to claim her as a dependent or not. If you can claim her but don’t, she still doesn’t get her exemption.

From the back of the 1040EZ, in the line 5 instructions:

Using the worksheet doesn’t give the filer her exemption.

5

I use a different tax software program. After entering the 1098T info for the parent return, there are subsequent questions where you enter pertinent info not on the 1098T and then a question about how much you would like to use for the AOTC. It then tells you the amount that is taxable to the student if you do that. On the student return there is a question about how much the parents used for the AOTC. It then comes up with the same figure that is taxable on the student return. So it sort of coordinates that on both returns.

Look for similar questions in TurboTax.

6

Thanks for all the help. I have read 970 multiple times and was confused on this point that was discussed in the table in the AOC section.

So 1) She is not eligible to claim the exemption and 2) she could do the AOC but will not get a refund.

3bm103: Thanks found that rule. Clearly makes no sense for my daughter to claim a non-refundable AOC at this time.

happymomof1: TurboTax usually takes longer because I check everything by hand. I have found that it doesn’t always do things right or need tweeting to get the right numbers. It does allow me to quickly see impacts of different options. I also like filing electronically so I can finish the verification process faster.

annoyingdad: Once again your answer aligns with my research. I asked the question since HR Block software recommended checking to see if it would be better to for my parents to claim the exemption when I was doing her returns. I thought it was implying that the exemption could be taken by either. At that point, I couldn’t see the return showing she was not eligible to take the exemption. As a side note, I played around with TurboTax about the last question you help me with (whether AQEE for 529 need to be reduce by taxable part of scholarship) and TurboTax treats it the same way you advised. Thanks for that and the warning about the kiddie tax.