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 IRS Pub. 970 to report a reduction in your education credit or tuition and fees deduction. Review IRS Pub. 970 for specific information related to reporting amounts from box 4 of form 1098-T."
To recapture the credit:
- Go to Screen 38.1, Education Credits/Tuition Deduction.
- Enter the Student Information:
- Enter a 1 or 2 in 1 = taxpayer, 2 = spouse.
- Enter the first name, last name and social security number.
- Enter the number of years in Number of years Hope credit claimed (if applicable).
- Enter the number of years in Number of prior years AOC claimed (if applicable).
- Scroll down to the Current Year Expenses subsection.
- Enter the Qualified tuition and fees (net of nontaxable benefits).
- Enter the Books and supplies required to be purchased from the institution.
- Enter the Books and supplies not entered above (AOC only).
- Scroll down to the Recapture Prior Year Credit (ERC) subsection.
- Enter a 1 or 2 in 1=AOC, 2=LLC.
- Enter an amount in Total qualified education expenses.
- Enter an amount from Line 4 of the 1098-T in Tax-free education assistance or refunds received after filing 20XX return.
Lacerte 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.
For tax year 2021:
- Tuition and Fees Deduction (Form 8917) has been repealed starting in Tax Year 2021.
- American Opportunity Credit & Lifetime Learning Credit (Form 8863) changes:
- 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
Also refer to Entering amounts in Form 1098-T and generating Form 8863 in Lacerte.