Can daughter claim education tuition expense on NY State Return but not on Federal? Don't want to waste 1 of 4 possible future AOTC credits

[wad2k]

This is basically follow up questions to an earlier question I asked.

 Details:19yr old Daughter atttened college for over 2 months but had to drop out for medical reasons.

That was the only school she attended in 2022.(took gap year after HS) 

Made $8500 in part time employment. 

Received 1098T T with Box 1 tuition paid $1228. No scholarships so still in debt to school for balance of tuition. Box 8 was checked "At least half time student" so should qualify for AOTC. 

We can't claim her as dependent because she was only a student for 2 months and she made over the income threshold. 

Since AOTC can only be claimed for 4 years, and the fact that she plans on returning to college next year, it would be more beneficial to not claim AOTC since it wouldn't give her that much back in the form of a refund. Approximately $1k as opposed to future AOTC credits up to $2500.

But on NY return, there is no 4 years. maximum total like Fed Aotc. 

So is it OK to claim the tuition paid on NY and not Fed for 2022? 

If something happens, where she doesn't go back to school in future, or for whatever reason, not be eligible for all 4 years of AOTC before age of 24, I would have her amend 2022 and claim the 2022 1098t amount. 

[Vanessa A]

Yes, you can claim the NYS education credit and not claim the federal credit.  

Under NY rules, since she is not claimed as a dependent and paid tuition at an eligible institution, then she can claim the credit.  This credit is a $400 refundable credit which means even if she does not have a tax liability, she can still get the $400.

As for the federal AOTC, if you paid more than half of her support, then she would not be eligible for the AOTC even if you are not claiming her.  Since she is under 24, she would need to support herself with earned income in order to claim the refundable portion of the credit.  Since her income is less than the standard deduction of $12,950, she would not benefit from the nonrefundable portion as she has no tax liability.