Lacerte 2020 and prior optimizes between the Tuition and Fees Deduction (Form 8917) and the Education Credit (Form 8863), and it looks at the following factors:
- The taxpayer's MAGI - if it exceeds $132,000 for MFJ, or $66,000 for S, MFS, or QW, then they can't take the Lifetime Learning Credit, per Form 8863 instructions.
- The taxpayer's MAGI - if it exceeds $180,000 for MFJ, or $90,000 for S, MFS, or QW, then they can't take the American Opportunity Credit, per Form 8863 instructions.
- The taxpayer's MAGI - if it exceeds $160,000 for MFJ, or $80,000 for S, MFS, or QW, then they can't take the Tuition and Fees Deduction.
Lacerte will calculate both scenarios and determine which would result in a lower tax liability.
To force either the deduction or the credit in Lacerte 2020 or prior:
Enter a 1 or 2 in the field labeled Blank=optimize, 1=force credit, 2=force deduction on Screen 38.1, Education Credits/Tuition Deduction. This will force Lacerte to calculate either form 8917 or 8863 and show if the taxpayer does or doesn't qualify.
- For example, if having the amount as an adjustment would provide a lower tax liability on Form 1040, line 61, then it will generate a Form 8917 and place the calculated figure on Form 1040, line 34.
- For example, if the tuition and fees expense is so small that there would be no tax benefit derived by taking it as an adjustment to income, or the tax liability would be smaller if the Education Credit were taken, it will generate a Form 8863 and place the calculated figure on Form 1040, line 50.
