Awful :{ HELP! Our19yr old Daughter - doesn't qualify as our dependent- withdrew from 1st yr of college after 2 month due to medical reasons. Received 1099T. Any tax credits?

[wad2k]

Our 19yr old Daughter had to withdraw from her 1st yr of college after 2 months due to medical reasons in fall of 22 semester. She turned 19 in 2022 earned approximately $8500 in part time employment. For those reasons, even though she lived at home, except for the brief time away at college, we can't claim her as our dependent because she made so much and was a student for only 2 months during 2022.

I'm working on her taxes. she received a 1099T for $1200 paid to the school which I believe is the Fed  Direct Unsub Student loan that was taken out. We also spent about a total of $1000 on supplies(notebooks, books from amazon and laptop). Is she eligible for any type of education credits or deductions on Federal and/or NY State taxes?

She still owes the school a ton of money because the date she withdrew was 2 weeks past the Colleges deadline for any type of refund.(I'm still going to try a pursue that matter somehow because the school is, in part, responsible for her medical reason to withdraw).

I'm just trying to figure out a way to get her out of some of this massive debt for a lousy 2 months of college.

Any advice would be greatly appreciated.

[CatinaT1]

My first question is if she was in high school from Jan-May 2022. Being a student doesn't necessarily have only to be as a college student. This might eliminate your concerns about her dependency.

Based on what you have said, it doesn't appear she will qualify for the American Opportunity Credit, but she may qualify for the Lifetime Learning Credit.

More information can be found here: 

Education Credits 

[wad2k]

She took a gap year after HS so was only a student for the 2 months in college. So because of that, am I correct that she can not be claimed as a dependent on our return?

I also thought  she would qualify for the Lifetime Learning Credit on her return, but unless I answered something wrong, tax program said LLC was $0. Which makes no sense. 

 I wasn't quite clear if she would be eligible for AOC, but I didn't think so. It just seems like she racked up all this debt for 2 months of school, had to withdraw, and the system seems designed against her.

[DaveF1006]

Yes, she would not qualify to be your qualifying child if she is over 19 and not a fulltime student at the end of the tax year. She might be able to be claimed as a qualifying relative under the qualifying relative rules. Here is the criteria.

1. The person can't be your qualifying child or the qualifying child of any other taxpayer.
2. The person either (a) must be related to you in one of the ways listed under Relatives who don't have to live with you, or (b) must live with you all year as a member of your household (and your relationship must not violate local law).
3. The person's gross income for the year must be less than $4,300.
4. You must provide more than half of the person's total support for the year.

Relatives that don't have to live with you for qualifying relative include:

• Your child, stepchild, or foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)

Based on what you told me, she wouldn't qualify for the AOC unless she was enrolled at least half time for at least one academic period.  The academic period could either be a semester or quarter depending on the school.

I don't see though why you wouldn't be able a claim a Lifetime Learning Credit.  You might go through your answers. Make sure she is eligible to be your dependent before you work on this section though because that may have disqualified you from claiming the Lifetime learning Credit.

Let us know if this helps.

[Hal_Al]

She qualifies for the Lifetime Leaning Credit (LLC). But the LLC is a non refundable credit. It can only be used to reduce your tax liability.  Her income is too low to have a tax liability, so her LLC is $0.

[wad2k]

Thank you.. That explains it. Here I thought I answered an interview question wrong.

It's as if the entire system has been designed against her. She is now sitting on over $13k in debt for 2 months of college, a State school none the less.. and she can't even take a tax credit for any of it. 

Terrible

But thank you again for the explanation. Solves the mystery.