There are some exceptions to this though! Even if you take the standard deduction, you can still deduct things like student loan interest, IRA contributions, self-employment taxes, and health insurance premiums if you're self-employed. These are called "above-the-line" deductions and they work differently.

Absolutely right! Those "above-the-line" deductions reduce your Adjusted Gross Income (AGI) directly and you can claim them regardless of whether you take the Standard Deduction or itemize. This is why tax terminology is so confusing for beginners - there are "deductions" that aren't affected by the Standard Deduction vs. itemizing choice. Thanks for pointing that out!

Yeah but tax software can mess this up sometimes. I had a friend who had major medical expenses that would have pushed him over the threshold to itemize, but his software didn't properly explain this to him. Always worth double-checking if you have unusual expenses.

Both are definitely mortgages - we used them simultaneously to purchase the home (one conventional loan and one through the employer's first-time homebuyer assistance program). The employer loan doesn't show up anywhere on the W-2, it's a completely separate arrangement with its own 1098. I'm wondering if it's because the employer loan has a much lower interest rate (2.5% compared to 3.25% on the main mortgage), and that's somehow affecting the overall calculation? Could a lower rate on the second mortgage somehow reduce the total benefit?

That's interesting. Even with the lower rate, more interest should still be more deduction. The fact that it's an employer loan makes me think there might be some fringe benefit taxation going on behind the scenes. Check if the interest rate on the employer loan is below market rate. If it is (which 2.5% would likely qualify as), the IRS can consider the difference between your rate and the market rate as taxable income - essentially treating the below-market rate as a benefit from your employer. This "imputed income" might be what's reducing your refund when you add the second 1098.

This is a really good point. AMT can definitely cause this kind of counterintuitive result. The software should tell you if AMT is being applied though - there's usually an AMT worksheet or form that appears.

Thanks for mentioning this! I did get a T4A with the RESP payments in box 42 and included that when I first started my return. So my refund calculation already included that taxable income. I think what happened is exactly what the first commenter explained - the tuition credits reduced my tax payable, which affected my refund calculation. I'm going to look into transferring some of the credits to my parents since they're in a higher tax bracket anyway.

That's good that you already included the T4A! Then yes, what's happening is just the normal tax calculation with the tuition credits. If your parents are in a higher tax bracket, transferring the maximum allowable amount to them probably makes the most sense for your family overall. Just remember you can only transfer after using what you need to zero out your own federal tax, and the maximum transferable is $5,000 of the federal amount.

Would it be illegal to just not include the T2202A form? Since it makes the refund lower?

Wait this is confusing me. So if I was in the US for 120 days this year, 90 days last year, and 60 days the year before, how do I calculate this? Is it 120 + (90/3) + (60/6)?

Yes, you've got it right! For your example it would be: 120 + (90/3) + (60/6) = 120 + 30 + 10 = 160 days. Since that's less than 183, you wouldn't meet the substantial presence test based on those numbers. But remember, if you're in the US at least 31 days in the current year AND you hit or exceed 183 days with this calculation, then you meet the substantial presence test and would be considered a US resident for tax purposes unless you qualify for exceptions like the closer connection.

Did you use any particular tax software to file the 8840? I'm trying to figure out if I can just submit it on its own or if I need to file it with a tax return.

I used the IP PIN option last year when I had this same issue. You can request one through the IRS website, but it takes about 2-3 weeks to arrive by mail. Once you have it though, it bypasses the AGI verification completely. Worked perfect for me!

Thanks for the info! Did you have to verify your identity to get the IP PIN? I tried making an IRS account before and couldn't get past their verification steps.

Just tried logging into last year's TurboTax account and they do actually show the "IRS Accepted AGI" which is different from what's on my PDF by about $200! Apparently there was an adjustment made. Going to try filing again with this number - fingers crossed!