Form 8863 - how to calculate adjusted qualified education expenses for college student?

Thanks for explaining that! What if the laptop isn't explicitly required in writing, but all the coursework basically requires computer access? My son's school doesn't technically mandate laptops but everything is submitted online and they use special software for his engineering classes.

That's a common situation and falls into a bit of a gray area. If the coursework practically requires computer access and special software for engineering classes, you could make a reasonable argument that the laptop is necessary for enrollment and attendance, even without an explicit written requirement. If you're audited, you'd want to document how the laptop is necessary for completing coursework, accessing required online materials, and using the specialized engineering software. Having syllabi that mention the online submissions and software requirements would help support your position. Just be aware there's always some interpretation involved, and the IRS may view it differently.

Does it handle situations where some scholarship money is applied to non-qualified expenses like room and board? That's where I always get confused because then not all of the scholarship reduces qualified expenses, right?

I'm a bit skeptical about tax apps handling education credits correctly. There are so many weird little rules. Does it actually check what expenses are required by the specific school? My daughter's art program requires specialized equipment that normal programs don't.

It does handle the scholarship allocation situation! That's actually one of the things I found most helpful. If the scholarship is designated for specific expenses, it follows those designations. If not specifically designated, it applies the scholarship first to qualified expenses, then to non-qualified ones, which maximizes your potential credit. For specialized program requirements, it asks you to upload or enter any program-specific required materials list from the school. It then compares your expenses against those requirements. For your daughter's art program, you'd just need to provide documentation that those specific supplies are required for her courses, and the system will factor that in correctly.

How does this actually work? It seems weird that some service could somehow get the IRS to call you when their phone lines are always jammed. Do they have some special connection?

Yeah right. I'll believe the IRS calls anyone back when pigs fly. They've had my amended return for 14 months and I can't even get them to acknowledge it exists.

It works by using their automated system to basically wait in the phone queue for you. They have technology that navigates the IRS phone tree and holds your place in line. When an agent finally becomes available, the system connects the call to your phone. There's no special connection - they're just handling the waiting part so you don't have to sit on hold for hours. And it really does work! I was skeptical at first too, but when I had questions about what field trip expenses qualified, I got clear answers from an actual IRS agent who called me. They can't help with processing times for amended returns, but they can definitely get you through to ask questions about forms like 8863.

Thank you for mentioning this! Since it's my daughter's sophomore year, I'm assuming the American Opportunity Credit would be the better option. Is there any reason I might want to choose the Lifetime Learning Credit instead if I qualify for both?

For a sophomore, AOTC is almost always the better choice. The maximum credit is higher ($2,500 vs $2,000), and 40% of the AOTC is refundable (up to $1,000), while the LLC is non-refundable. The only scenarios where LLC might be better would be if you've already claimed AOTC for 4 years for this student (not possible for a sophomore), or if your income is right at the phaseout threshold for AOTC but below the LLC phaseout. But that's a rare situation. For most people with a sophomore student, AOTC is definitely the way to go.

Did your son check the box that said he could be claimed as a dependent? Because if he didn't, and he claimed himself, that would cause issues. But if he indicated he COULD be claimed (even if he filed his own return), you should still be able to claim the education credit.

This is such an important point that catches so many families off guard! Just to clarify for others reading - if your student files their own return and claims their personal exemption (or doesn't check the box indicating they can be claimed as a dependent), then the parents lose the ability to claim education credits even if they actually paid all the expenses. The key is coordination between the student and parent returns. The student needs to indicate on their return that they CAN be claimed as a dependent (even if they're filing to get a refund of withholding), which then allows the parents to claim both the dependency exemption and education credits on their return. It's definitely worth having this conversation with college kids before tax season to avoid the amendment headache you went through!