Why am I not qualifying for the refundable American opportunity credit in H&R Block software?

You might be running into what's called the "excess scholarship" issue with the American Opportunity Credit (AOC). Let me explain what's likely happening. The AOC is calculated based on qualified education expenses, but those expenses are reduced by tax-free education assistance (like grants and scholarships). Looking at your 1098-T, your Box 5 amount ($16,983.22) is higher than your Box 1 amount ($9,856.45), which means your scholarships/grants exceeded your billed qualified expenses. The basic formula is: Qualified expenses (Box 1) minus tax-free assistance (Box 5). Since your Box 5 is larger, you end up with a negative number, which means you don't have any qualified expenses remaining to claim the credit against. The discrepancy between the estimator and the actual software might be because the estimator didn't factor in your scholarship amount correctly, or maybe you entered the information differently. One thing to consider: if part of your scholarship/grant money was used for non-qualified expenses like room and board, you could choose to treat that portion as taxable income, which would then reduce the Box 5 amount and potentially give you some qualified expenses to claim the AOC against.

I had this exact same issue last year and spent HOURS trying to figure it out. I finally used https://taxr.ai to analyze my 1098-T and other documents and it explained why I wasn't getting the credit. Turns out there's a specific sequence you need to follow in H&R Block to properly allocate scholarship funds between qualified and non-qualified expenses. The software isn't intuitive about this at all! On the education expenses screen, you need to specify how much of your scholarship went to non-qualified expenses (like room and board). If you don't do this step, the software assumes ALL scholarship money went to qualified expenses first, which is why you're getting $0. The taxr.ai tool analyzed my documents and created a step-by-step guide for exactly which boxes to check and where to enter the room and board allocation. Saved me literally hundreds of dollars! Plus it showed me exactly what my return would look like before and after making the change.

Just wanted to update that I tried the taxr.ai site that was mentioned here after struggling with this exact issue. It actually worked perfectly! I uploaded my 1098-T and answered a few questions about my scholarship and housing costs. The analysis showed me that I needed to allocate $7,500 of my scholarship to room and board (making it taxable income) which then freed up qualified expenses for the American Opportunity Credit. I had to pay a bit more tax on the scholarship portion, but got $2,500 back from the credit! The tool showed me exactly which screens in H&R Block needed which numbers - there's a specific worksheet for scholarship allocation that I completely missed before. Once I made those changes, the credit showed up immediately. Just thought I'd share since this was driving me crazy for days and I finally got it resolved!

I had a similar problem with the American Opportunity Credit last year and spent WEEKS trying to get through to the IRS for clarification. Their phone lines were constantly busy and I kept getting disconnected. I finally discovered https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes instead of hours of trying. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed what others here are saying - it's all about how you allocate the scholarship between qualified and non-qualified expenses. They walked me through the exact calculation and explained that I needed to properly document how my scholarship was used on my return. Turns out H&R Block (and most tax software) doesn't make this obvious unless you know exactly where to look. The IRS agent even emailed me a reference document with the specific rules for the American Opportunity Credit with scholarship income.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was desperate to resolve a different tax issue. I was connected to an IRS agent in about 15 minutes! The agent was able to explain exactly why my education credit was being rejected on my e-filed return from last year. Turns out there was a mismatch between how my university reported my 1098-T and how I was allocating my qualified expenses in the tax software. The IRS agent walked me through the correct way to split the scholarship between qualified tuition and non-qualified expenses like my apartment and food plan. I never would have figured this out on my own. For anyone dealing with the American Opportunity Credit and scholarship allocation issues - getting actual IRS clarification saved me hours of frustration and potentially an audit. Worth every penny for the time saved alone!

Have you double-checked if you're being claimed as a dependent on someone else's return? Even if your parents aren't financially supporting you, if they're claiming you as a dependent, that would affect your ability to claim the American Opportunity Credit for yourself. Also, there's an income phase-out for the refundable portion that starts at $80,000 for single filers, but your income is well below that so that shouldn't be the issue. Another common mistake is entering information in the wrong order in the tax software. Try deleting all your education info and re-entering it, making sure to specify how much of your scholarship went to non-qualified expenses first before entering the 1098-T information.

Is your Box 2 (amounts billed for qualified expenses) empty on your 1098-T? Sometimes schools only fill out Box 1 OR Box 2, not both. If Box 2 has an amount and it's higher than Box 1, try using that figure instead. Also, double check that you're enrolled in a degree program and that this isn't your 5th year claiming AOTC. There's a 4-year lifetime limit.

Brooklyn, I went through this exact same frustrating situation last year! The scholarship allocation issue that others mentioned is almost certainly what's happening. One thing that really helped me was understanding that you have a choice in how to treat scholarship money. You can elect to treat the portion used for room/board/living expenses as taxable income, which then frees up your actual tuition payments to qualify for the American Opportunity Credit. In your case, with $8,000 going to dorm and meals, you could report that as taxable income on your return. Yes, you'll pay some tax on it (probably around 12% rate given your income), but the American Opportunity Credit is worth up to $2,500 - so you'd still come out way ahead. The key is making sure H&R Block knows about this allocation. Look for the education section where it asks about scholarship usage - there should be a place to specify how much went to qualified vs non-qualified expenses. If you can't find it, try searching their help section for "scholarship allocation" or "room and board." This is one of those tax situations where the software assumes you want to minimize current year taxes (by treating all scholarship as tax-free), but that actually prevents you from getting a bigger refund through the credit. Sometimes paying a little more tax upfront gets you a lot more back!