I am 17 year old freshman (US Citizen). My parents paid my tution fees (as a gift to me). They are NOT going to claim me as dependant. In that case, if I file my own return, can I claim refundable AOTC? I have zero earn income and have small interest income. Bit confused as From 8863 says expenses paid by a thrid party are treated as paid by students. If so tuition expenses paid by parents can be treated as gift to me that I used towards tuition fees?
However under student eligibility criteria it says your earned income should be more than half of your support, does it mean I am not qualified?
No, you cannot get the refundable portion of the AOTC unless you paid for education expenses from your own EARNED income. See Discussion
A full-time unmarried student, under age 24, whether a dependent or not, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working.
Q. it says your earned income should be more than half of your support, does it mean I am not qualified?
A. Yes.
"My parents paid my tution fees (as a gift to me)."
No. Your parents paid your tuition as part of supporting you.
"They are NOT going to claim me as dependent."
That's actually allowed, but, as you now know does not work.
While technically there is a provision that allows the student-dependent to claim a federal tuition credit, from a practical matter it seldom works out. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit.
If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit. The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)