This article will help you understand the ideal workflow for entering education expenses in ProSeries to generate the maximum credit or deduction the return qualifies for. There are four main steps that should be completed to generate the best available credit or deduction:
Tuition and Fees Deduction (Form 8917) has been repealed starting in Tax Year 2021.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
Step 1: Activating the Student Info Worksheet
- Open the tax return to the Federal Information Worksheet.
- If a dependent is the student::
- Scroll down to Part III Dependent/Earned Income Credit/Child and Dependent Care Credit Information.
- Enter the basic identification information.
- Check the box for Educ Tuition and Fees box.
- Click the QuickZoom to the Dependent Student Information Worksheet.
- If the taxpayer or spouse is the student:
- Scroll down to Part X - Additional Federal Return Information.
- Scroll down until you see the Education Expenses checkboxes.
- Check the box for either Taxpayer or the spouse showing they have qualified education expenses.
- Click the QuickZoom to the Student Information Worksheet.
- You can have as many Student Information Worksheets as you need for the tax return. Just make sure every student has their own Student Information Worksheet, as their name will be at the top.
Step 2: Determining credit and deduction eligibility
For each Student Information Worksheet you'll need to complete Part 1 and Part II for ProSeries to determine which credits or deduction the student is eligible for.
Once both Part 1 and Part 2 are complete, ProSeries will show in Part III which credits or deudctions the student is eligible for. If the student is ineligible, it'll give a brief description of why.
Step 3: Entering education expenses
On the Student Information Worksheet you can enter education expenses from a 1098-T, a 1099-Q, and expenses not received on a form.
Step 4: Run the optimizer
- On the completed Student Information Worksheet scroll down to Part VII - Education Credit or Deduction Election section.
- Select the QuickZoom to launch Automatic Education Expenses Optimizer.
- In Part II - Optimize Education Expenses for the Lowest Tax check box 1 to Launch OPTIMIZER.
- Review the summary in Part III to see what impact the education expenses had on the tax return.
- If you make any changes to the education expenses or the Student Information Worksheet you'll need to launch the optimizer again to see the changes on the tax forms.
What if something doesn't look right?
This quick table shows you some of the most frequent areas to double-check for specific tax scenarios:
|Scholarship is being taxed||Student Info Wks,Part V, Line 9||In part V, line 7 make sure the amount used for qualified expenses is entered. If the expenses are not at least the amount of the scholarship NOT used for ed expenses will be taxable.|
|Credits reduced or not calculating because of 529 distribution||Student Info Wks,Part VIII, Line 3||Are education expenses at least as much as distribution?|
|Where do I enter bonds cashed for education purposes?||Student Info Wks,Part X||Info will then flow to form 8815.|
|Credit is not calculating:||Amount of scholarship vs. expenses.||If scholarship meets (or exceeds) expenses, no credit will calculate since student did not pay anything.|
|Credit is not calculating:||Is student in High School?||Education credits are not for HS students.|
|Credit is not calculating:||1040, line 15||Does the return have any taxable income?|
|Credit is not calculating:||1040, line 15||Is taxable Income above AGI limitations?|