Per the 1098-T Form instructions for Box 4:
- "Box 4 shows any adjustment made for a prior year for qualified tuition and related expenses that were reported on a prior year Form 1098-T. This amount may reduce any allowable education credit that you claimed for the prior year. See "recapture" in the index to Pub. 970 to report a reduction in your education credit or tuition and fees deduction. Review Publication 970 for specific information related to reporting amounts from box 4 of form 1098-T."
Follow these steps recapture the credit:
- Go to the Input Return tab.
- From the left of the screen, select Credits and choose Education/ Tuition (1098-T, 8863, 8917).
- Locate the Persons and Expenses Qualifying for Education Credits or Tuition Deduction (1098-T) section.
- Under the Student Information subsection, enter the following fields:
- 1=taxpayer, 2=spouse.
- First name
- Last name
- Social security number
- Locate the American Opportunity Credit (AOC) Disqualifiers subsection and enter the following fields:
- Number of prior years Hope credit claimed
- Number of prior years AOC claimed
- Scroll down to the Current Year Expenses subsection and enter the following fields:
- Qualified tuition and fees (net of nontaxable benefits)
- Books and supplies required to be purchased from the institution
- Books and supplies not entered above (AOC only)
- Scroll down to the Recapture Prior Year Credit (ECR) section and enter the following fields:
- 1=AOC, 2=LLC
- Total qualified education expenses
- Tax-free education assistance or refunds received after filing 20YY return
- YY represents the two-digit tax year.
ProConnect will generate an Education Credit Recapture (ECR) Worksheet and carry the recapture amount to the tax line on Form 1040, line 44 (1040A, line 28). The amount will be calculated on the worksheet based on the entries made.
If there was an adjustment made to tuition in a year when the Tuition Deduction was claimed rather than an Education Credit, the amount to be recaptured must be manually computed and entered as Other Income.
Additional important information:
- Tuition and Fees Deduction (Form 8917) has been repealed starting in tax year 2021.
- American Opportunity Credit & Lifetime Learning Credit (Form 8863):
- Expanded Lifetime Learning Credit to phase outs that mirror American Opportunity Credit in 2021
- MAGI phase out range --$160,000 --$180,000 married filing joint; $80,000 --$90,000 other filers
