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Parent of a Freshman - looking at AOTC for 2017 taxes and planning for 2018, haven't gotten good advice on how to prepare for this year's taxes, getting an extension, and looking for a list of things I need to get together to take to accountant.

Any clarifications or checklist would be great, it has been a confusing process to try to figure out. I get what are generally deductible expenses, and what are not, but I guess I'm looking for a comprehensive, specific list of things so I might consider something I would not have thought of myself.

  • Is this the US? What's AOTC? – Brythan Apr 8 '18 at 3:12
  • American Opportunity Tax Credit. A US based college tax credit. – JoeTaxpayer Apr 8 '18 at 11:15
  • did you use money from a 529 plan, were there scholarships used for the tuition? – mhoran_psprep Apr 8 '18 at 16:48
  • Thank you and sorry for not clarifying. We have a prepaid tuition plan in Florida, it was the "old plan", strictly prepaid installments, not directly tied to the market, and he had a $3,000 private scholarship, plus his Bright Futures scholarship that provides 100% percent tuition this year - 17-18 and I believe it was up to $300 in textbooks. I don't have access to his myUFL account to see what money they pulled from where, I believe, the order was supposed to be BF first, FL.PPD. and then private schol. – lynn jones Apr 8 '18 at 19:47
  • I am waiting for him to send a copy of the 1098 from his account, they didn't send us one, guess they weren't required to do so .... – lynn jones Apr 8 '18 at 19:48
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The American Opportunities Tax Credit (AOTC) is based on the amount spent on qualified education expenses. This includes the amount spent on tuition and, unique to the AOTC, also includes the amount you spent on required textbooks and supplies.

The tuition portion should be spelled out on a 1098-T form that you should have received from the college. In general, you need this form and should try to get it if you haven’t received it. If you can’t, however, you’ll need some documentation that shows how much you paid and what the amount is for. Tuition is allowed, but room-and-board is not.

For the required textbooks and supplies portion, receipts from the bookstore should be sufficient if the book titles are shown so it is clear that the items are for required materials.

See the following for more information:

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    2018-04-08 12:12:20Z (your post time) 2018-04-08 12:12:21Z (mine) You literally beat me by 1 second. The remarkable thing is that this was on a question that was posted 11 hours prior. I’m sure for new questions it’s relatively common to have answers posting within minutes or seconds of each other – JoeTaxpayer Apr 8 '18 at 12:17
  • sorry, I googled this site and couldn't find what I was looking for ... I guess I am looking for a list of what I need to take to a tax planner, we are filing for an extension ... we had saved receipts for things like coffee pot, toaster, etc. for his dorm room, and other such junk from thrift shops (utensils, etc.) do those things, a hamper, a step ladder, (for his raised bed), count or just paper, pen and pencil??? He did get a new computer, and since his major is Computer Engineering, I know that will count .... most books he got 2nd hand via FB or Amazon, bookstore is too high .... – lynn jones Apr 8 '18 at 19:52
  • @lynnjones Please read JoeTaxpayer’s and my answers again very carefully. It is likely that tuition alone will give you the maximum AOTC tax credit, but if not, only required textbooks (and supplies) can be used. Furnishings for the dorm room, office supplies, computer, etc. are not allowed (with the exception of the case where your school requires the use of a specific computer). – Ben Miller Apr 9 '18 at 18:40
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See IRS Publication 970. On page 13, we have the section titled "What expenses qualify".

The school is obligated to send you the 1098-T to document you paid the tuition bill. The AOTC (American Opportunity Tax Credit) offers a $2500 credit (not a 'tax deduction', but a direct reduction of tax owed, a credit) for $4000 worth of higher education expenses. For most situations, $4000 for the first semester of school will be no issue, the billed tuition, likely covers this.

If not, "expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution."

The IRS pub offers an interesting anecdote

Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. William bought his books from a friend; Grace bought hers at College W's bookstore. Both are qualified education expenses for the American opportunity credit.

This leads me to advise that if you need to use these expenses, contemporaneous notes should suffice. For books or expenses purchased by check or credit card, keep those bills/receipts. For these cash purchases, the day, date, book title, class used for, and cost would impress any agent auditing you, should that occur.

Last - keep in mind, the tax code doesn't allow double dipping here. I am in the exact same timing as you, freshman student this year. When I went to pay her tuition, I was about to pay the bill via our 529 account, and after reading Pub 790, realized I'd lose the $2500 credit if I did that. To get the credit, I had to be sure to pay $4000 in cash. I realize that for 2017, the transactions are behind you, but for the member here reading this for schooling that just started, this may help avoid such a mistake.

  • Thank you, that is what I am slowly realizing and aggravated my "tax preparer" has not provided me better "tax planning" and thus looking for someone else, all she wants to do is send me to her cousin who works for Edward Jones .... :-/. I don't need, want, any more "products." I just want some pointers about how not to shoot myself in the foot. Thanks for the info .... – lynn jones Apr 8 '18 at 19:56
  • Can you tell me some things to definitely claim that might be overlooked??? I got the basics .... not sure if we will make the full threshold or not..... – lynn jones Apr 8 '18 at 19:57
  • By the way, the school has not sent the 1099, the prepaid program did, and UFL has the 1098 on their website but I need him to download and send to me .... I tried to let him figure out how to pay his bills once the money was available, never had a clue it mattered "how" it got paid .... – lynn jones Apr 8 '18 at 19:59

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