Education expense optimization (1040)

Alerts and notices

The Education Expense Optimization utility is currently disabled because the tuition and fees tax deduction has expired. If the deduction is extended, the utility will again be available.

Use the following procedure to assess whether it is more advantageous for your clients with education expenses to claim the tuition and fees deduction or the education credits. The education expense optimization process produces a detailed report that shows, on a per-student basis, the amount of the tuition and fees deduction or education credit that will be reported on the tax return.

Education expense optimization allows you to:

  • Assess whether it is more beneficial for your client to claim the tuition and fees deduction or education credits on a per student basis.
  • Generate a detailed report that includes a Student Summary section and a Tax Summary section. The Student Summary section shows each student's name, Social Security number, and the optimal amount of American Opportunity credit, Lifetime Learning credit, or Tuition and Fees deduction that can be transferred automatically to the tax return. Note that all students for whom you have entered qualified expenses in the Eligible student information statement dialog in Screen Educate will be shown on the report, not just those students for whom you have chosen to optimize expenses. The Tax Summary section shows how key values in the federal and state tax returns will be affected if you choose to transfer the optimized amounts to the return.

Optimizing education expenses

The following conditions must be present to optimize education expenses.

  • The open client must not be a 1040NR.
  • The filing status must not be married filing separately.
  • The return must not be a dual status return.
  • At least one item in the Tuition and Fees Deduction and Education Credits statement dialog in Screen Educate must include Ed Exp Code 4 or 5.

To optimize education expenses:

  1. In Screen Educate, click the Statement dialog button attached to the Eligible student information field to open the Tuition and Fees Deduction and Education Credits statement dialog.
  2. In the Tuition and Fees Deduction and Education Credits statement dialog, enter information for all eligible students. Enter education expense optimization code (Ed Exp Code) 4 (optimize between the American Opportunity Credit and the Tuition and Fees Deduction) or 5 (optimize between the Lifetime Learning Credit and the Tuition and Fees Deduction).

    Note: The student's Social Security number can be chosen from the drop-down list in the statement dialog. Only the taxpayer's, spouse's, and their dependent's Social Security numbers will be present in the list. If the taxpayer or spouse is a dependent of another, their Social Security number will not be available for selection unless the Dependent of another but claiming education credit field is marked in Screen Educate.

  3. Click OK to save the information you entered in the Tuition and Fees Deduction and Education Credits statement dialog.
  4. Optional: You can optimize education expenses with or without state returns. State information is included by default. To exclude state returns from the optimization process, enter X in the Exclude state(s) net due/-overpayment in education expense optimization field.
  5. Click the Print or Print Preview button to print or preview the return. (For more information, see Printing tax returns.) The Education Expense Optimization report will be generated and the optimized amounts will transfer to the return.


    • By default, the Education Expense Optimization report is automatically generated when printing or previewing a return. To change this option, choose Setup > 1040 Individual, click the Other Return Options button, click the Other tab, and clear the Enable Education expenses optimization during print checkbox.
    • You can also optimize education expenses for an open return by performing these steps.

      1. Choose Utilities > Education Expense Optimization.
      2. Click the Preview or Print button to run the optimization process. After the report has been previewed or printed, the Preview and Print buttons are automatically replaced with an OK button.
      3. Do one of the following:

        • Click OK after previewing or printing the summary report to automatically transfer the amounts shown on the report to the tax return.
        • Click Cancel after previewing or printing the summary report to return to data entry.

        Note: You can print the Education Expense Optimization Report to FileCabinet CS if you are licensed for FileCabinet CS and have it installed. After choosing Utilities > Education Expense Optimization, click the Print button, mark the Store image in FileCabinet CS checkbox, then click either the Print button or the To Cabinet button. (The To Cabinet button appears when the FileCabinet CS checkbox is marked and the Printer checkbox is not marked.)