Intuit HelpIntuit
Understanding program optimization for the Tuition and Fees Deduction vs. education credits
by Intuit• Updated 1 year ago
This article will assist you with understanding how ProConnect Tax optimizes between the following credits and deduction:
- The Lifetime Learning Credit
- The American Opportunity Credit
- The Tuition and Fees Deduction
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- Tuition and Fees Deduction (Form 8917) has been repealed starting in Tax Year 2021.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
How does the program optimize between the Tuition and Fees Deduction and education credits for tax year 2021?
When ProConnect optimizes between the Education Credit (Form 8863), it looks at a few factors:
- If the taxpayer's MAGI exceeds $180,000 for MFJ, or $90,000 for S, MFS, or QW, then they can't take the Lifetime Learning Credit (LLC).
- If the taxpayer's MAGI exceeds $180,000 for MFJ, or $90,000 for S, MFS, or QW, then they can't take the American Opportunity Credit.
ProConnect Tax will calculate both scenarios and ask, "Which will result in a lower tax liability?"
How does the program optimize between the Tuition and Fees Deduction and education credits for tax year 2020?
When ProConnect optimizes between the Tuition and Fees Deduction (Form 8917) and the Education Credit (Form 8863), it looks at a few factors:
- If the taxpayer's MAGI exceeds $138,000 for MFJ, or $69,000 for S, MFS, or QW, then they can't take the Lifetime Learning Credit (LLC).
- If the taxpayer's MAGI exceeds $180,000 for MFJ, or $90,000 for S, MFS, or QW, then they can't take the American Opportunity Credit.
- If the taxpayer's MAGI exceeds $160,000 for MFJ, or $80,000 for S, MFS, or QW, then they can't take the Tuition and Fees Deduction.
ProConnect Tax will calculate both scenarios and ask, "Which will result in a lower tax liability?"
Follow these steps to force the credit or deduction in tax year 2020 and prior:
- 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.
- Scroll down to the Current Year Expenses subsection.
- Enter a 1 or 2 in the field labeled Blank=optimize, 1=force credit, 2=force tuition deduction.
- This will force the program to calculate either Form 8917 or 8863 and show if the taxpayer does or doesn't qualify.
Related topics
Sign in now for personalized help
Ask questions, get answers, and join our large community of Intuit Accountants users.
More like this
- Entering education expenses in ProSeriesby Intuit•133•Updated almost 2 years ago
- Optimization between the tuition and fees deduction and the education credit in Lacerteby Intuit•55•Updated March 18, 2024
- Common questions for Form 8863 Education Credits in Lacerteby Intuit•2•Updated almost 2 years ago
- Entering 1098-T Tuition Statement, Box 4 adjustments for a prior year in ProConnectby Intuit•7•Updated over 2 years ago