Education credit - midwest disaster area

[L.S.]

have a client who has education expenses in a disaster area - qualifies for lifetime learning credit. last year had a box on ed exp worksheet to check if eligible. none this year. how do i get line 7b to show the qualified exp on this line. i can override, but I don't think I should have to???

[Margaret CPA in OH]

Did you complete the 1040EdExp worksheet? The far right side has a place to input such expenses.

[Lion EA]

Isn't the Hope Credit the one that's most beneficial for disaster area expenses, if student otherwise qualifies?

[Margaret CPA in OH]

Good point, Lion. I checked on this for two clients yesterday and discovered that (confession - I didn't know before) the American Opportunity Credit is an expansion of the Hope Credit. So if L.S.'s client doesn't qualify for the first 2 years (he did say client qualified for LLC), then American Opportunity might work. It does so beautifully for my folks, a sweet, young married couple both working full-time and both going to school almost full-time. They are to be admired, I think.

[Lion EA]

The new AOC is expanded from the old Hope. But, the old Hope still exists and is increased (doubled?) in midwestern disaster areas; so do check on it if your clients qualify.

[L.S.]

yes, it is lifetime learning credit since he is in 5th year in college - yes i did complete the worksheet, but if i put in the amt of exp in the midwest disaster box - it doubles his qualified expenses and I don't want that - i just need to have his qualifed expenses come through on line 7b so it will take 40% for credit. like I said, last year there was a box on worksheet to check if qualify for the disaster area.

help - what am I missing?

[Margaret CPA in OH]

I went back to my students form and input LLC. Then I input $3000 for tuition and fees and $5000 for additional expenses for Midwestern Disaster addl exp. This carried easily to 8863, line 7b and the 40% calculation. If I put $8000 in the Midw Dis box, it calculates the 40%. I'm thinking the box carries totals properly if all qualifying expenses for Midw Dis are put into that box only.

But then I wanted to know what those extra expenses could be. Turns out, you probably know, it is only room and board and only if at least half-time. I guess that's because some folks may have had to pay these extra expenses if displaced from their homes. Otherwise, only tuition and fees, books, supplies, and equipment qualify for LLC.

Anyway, it seems to work for me so am sorry that I can't help further.

[L.S.]

Thanks Margaret, finally got it figured out correctly. Yes, I was using only tuition and fees and yes, he is half-time student. On the education worksheet I was putting the amount in the box called tuition and fees for 2009, however I should have put this amount in the box called midwest disaster box. I put this in the right box and it does calculate correctly. My goodness, what an ordeal with all of these choices for the education credit! There is going to be a lot of time-consuming work put into this credit to choose the best one with each individual circumstance!

thanks again, Margaret! blessings to you!

[Margaret CPA in OH]

You are more than welcome. We are all here to help each other. It was lucky that I just had this issue so was in the mindset. Also, I am so grateful for that worksheet! Can you imagine the time-consuming calculations to optimize without it?