Anyone else think it's ridiculous that the tax code makes these education credits so complicated? I spent 3 hours trying to figure out if I qualify for AOC or LLC last year. In the end I just paid a tax professional $275 to sort it out for me because the forms and publications were so confusing!

I went through a very similar situation when I transitioned from undergrad to grad school. The key thing to remember is that the American Opportunity Credit has two main requirements: you must be in your first four years of post-secondary education AND you can only claim it for four tax years total. Since you mentioned this was your final undergrad semester, you're likely still within the "first four years" requirement, but if you've already claimed AOC for four previous tax years, you've hit the lifetime limit. From your post, it sounds like you paid $14,300 for your final undergrad semester - that's a significant amount that could result in substantial tax savings if you're eligible. If you haven't used up your four-year AOC limit, you could potentially get up to $2,500 in credits for those undergrad expenses. For your grad school expenses ($22,500), you'd need to look at the Lifetime Learning Credit, which would give you up to $2,000 (20% of the first $10,000 in expenses). I'd recommend checking your previous tax returns to see exactly how many years you've claimed the AOC. If you're at the four-year limit, then Lifetime Learning Credit becomes your best option for both semesters. The income limits mentioned by others are also important to verify - make sure your modified adjusted gross income falls within the eligibility ranges.

Has anyone dealt with reporting this excess scholarship income when the student has no way to pay the taxes? My daughter's in this exact situation - scholarship exceeds tuition by $7200, but that money went directly to her housing which is already spent. She has no income or savings to pay the tax bill. Does she need to make estimated tax payments during the year?

This is such a common confusion for families! One thing that might help clarify the situation is understanding that even though your son is your dependent, the IRS views scholarship income as belonging to the student who received it, not the parents. This is different from other types of investment income that might be reported on the parent's return under certain circumstances. For the $6,800 excess, your son will need to file Form 1040 and report this amount on Line 1a as wages (with "SCH" written next to it to indicate scholarship income). Make sure to keep good records of what the scholarship was used for - the IRS may want documentation showing which expenses were qualified vs. non-qualified. Also, don't forget to check if your son might owe estimated taxes for next year if this scholarship pattern continues. Since there's no withholding on scholarship money like there is with regular wages, he might need to make quarterly payments to avoid underpayment penalties.

Based on everyone's experiences here, it sounds like Form 6251 is pretty much required when you have ISO activity, even if you don't owe AMT. I'm dealing with a similar situation - exercised some ISOs last year and trying to figure out the most cost-effective way to handle my taxes. Has anyone tried just preparing the Form 6251 by hand and then entering the results into FreeTaxUSA manually? I'm wondering if that might be a middle-ground approach that avoids the expensive software while still meeting the IRS requirements. The form itself doesn't seem too complex if you have your Form 3921 information handy. Also curious if there are any good resources or guides specifically for calculating AMT on ISOs that don't require expensive software subscriptions?

I've been following this thread closely since I'm in a nearly identical situation - exercised ISOs last year and trying to avoid TurboTax's fees. Based on all the experiences shared here, it's clear that Form 6251 is essentially mandatory when you have ISO activity, regardless of whether you actually owe AMT. What I found most helpful was Brooklyn's approach of preparing Form 6251 manually and then entering the results into FreeTaxUSA. I tried this myself using IRS Publication 525 (which covers stock options) along with the Form 6251 instructions, and it worked out well. The key insight is that the "bargain element" (difference between fair market value and exercise price from your Form 3921) goes on line 2j of Form 6251 as a preference item. For anyone considering this route, I'd recommend having your Form 3921, a calculator, and about an hour set aside. The IRS instructions are actually pretty clear once you understand that you're just documenting why you don't owe AMT rather than calculating a tax you actually have to pay. It definitely beats paying extra for software or risking an IRS inquiry later. Thanks to everyone who shared their experiences - this thread probably saved me both money and a potential headache!

Don't forget to save documentation proving they lived with you all year! IRS can ask for: school records showing your address, medical records, statements from neighbors, church records, etc. Start collecting this now in case you're asked later.

Just to add another perspective - I went through a similar situation a few years ago when I was supporting my partner and their child. The key thing that helped me was keeping meticulous records throughout the year, not just at tax time. I created a simple spreadsheet tracking all expenses I paid for them - groceries, utilities, rent, medical bills, clothing, school supplies, etc. I also kept receipts and bank statements showing the payments came from my accounts. When I filed my taxes, I had clear documentation that I provided more than 50% of their support. For the relationship dropdown in H&R Block, I did select "Other" for both my partner and their child, just as others have mentioned. The software walked me through additional questions to confirm they met the qualifying relative tests. One thing I learned is that it's worth double-checking your state tax implications too - some states have different rules for dependents and filing status than federal. But overall, if you truly provided more than half their support and they lived with you all year, you should be able to claim them. Just make sure you have the documentation to back it up!

I've been dealing with K-1 forms for a few years now and this is such a common frustration! The issue you're running into is that FreeTaxUSA, while great for most standard tax situations, has limitations when it comes to the more complex aspects of partnership tax reporting that K-1s often involve. Since you mentioned this is from a rental property investment, there are likely passive activity rules at play that require additional forms like Form 8582. Even though your situation might seem straightforward, rental property partnerships often trigger these rules automatically, and FreeTaxUSA just doesn't have the capability to handle the calculations properly. I'd strongly recommend switching to software that can handle K-1s properly rather than trying to work around it. TaxAct Premium seems to be the most cost-effective option that people have had success with based on the other comments here. Yes, it's more expensive than FreeTaxUSA, but filing incorrectly because of software limitations could cost you way more in the long run if the IRS flags your return for review. Don't feel bad about having to switch - this happens to tons of people every year when their tax situation gets just a bit more complex than basic software can handle!

I've been through this exact frustration with FreeTaxUSA and K-1 forms! The issue usually comes down to specific reporting requirements that FreeTaxUSA simply can't handle. For rental property K-1s like yours, it's almost always related to passive activity loss rules or at-risk limitations that require additional forms. Here's what I'd recommend: First, check Box 20 on your K-1 for any letter codes - if you see codes A, B, C, or D, that's definitely what's causing the error. These codes indicate you need Form 8582 for passive activity limitations, which FreeTaxUSA doesn't support well. Based on everyone's experiences here, TaxAct Premium seems to be the sweet spot for handling K-1s without breaking the bank. It's more than FreeTaxUSA but way less than TurboTax Premier, and it actually knows how to properly process all the passive activity rules and generate the right supporting forms automatically. Don't try to manually enter K-1 info in other sections of FreeTaxUSA - that's asking for trouble with the IRS. K-1 income has to flow through specific schedules and forms to be reported correctly. Better to spend a bit more on proper software than deal with potential audit issues later!