Can I claim the American Opportunity Credit? I am 22, I made $6,000 during the year, parents gave me ~$350 a month, paid tuition with loans in my name, and was full-time.

[Carl]

ALso, I've put details in an answer box in this thread, because I can't format it in a comment box the way it needs to be formatted. The important thing to note here, is that if your parents qualify to claim you, then when you file your tax return you must select the option for "I can be claimed on someone else's return". You won't claim any of the education stuff or get the self-exemption. But just the standard deduction alone will get all taxes withheld from your 2017 income refunded to you.

[mm195412]

My parents did not pay any of my expenses, they gave me $350 a month. I am not counting that as my money. If we were doing journal entries, I would have a $6,000 credit for wages, a $4,000 credit for gifts, and a $10,000 credit for loans. My parents paid none of my educational expenses, I paid all educational expenses with loans in my name. My parents filled out the worksheet and could not claim me.

[Carl]

Again, it does not matter what your parent's paid or didn't pay. There is absolutely no requirement what-so-ever for your parents to provide you any support at all. Not a single penny. The support requirement is on you, and only you. That $350/mo your parents gave you is a gift. If you used it to pay utilities with, then it doesn't count for *you* providing your own support, because *you* did not physically work for and earn that $350 a month.

[mm195412]

So my parents paid $350 a month of my expenses. If tuition is counted and the loans were in my name, first I would deduct $2k in scholarships. So I provided 8k out of the 10k. Next we have rent and utilities, which is $350 a month or $4,200 a year. Let's say that my parents paid that. So $6,200 is paid by my parents and scholarships, 8k is paid by me in loans, and the 6k in wages went to my living expenses.

[mm195412]

Okay but if there is a 50% requirement, I got 2k from scholarships and 4k from my parents, I made 6k and took out 10k in loans, isn't the math clearly me paying over 50%?

[mm195412]

Like what I am trying to say is the loans are already more than the scholarships, grants, parents support, 1099-Q. I also had wages on top of this, so wouldn't I be far over the 50% requirement?

[Carl]

Realize there are two determinations to be made here, and they have no relationship to each other.
The first determination is to determine if anyone else (namely your parents) qualify to claim you as a dependent. If you provided more than 50% of your own support, then you parents do not qualify.
Now for determining if you meet the 50% support requirement (and only for this requirement) what counts here is:
 -Scholarships/grants received in the tax year, regardless of what tax year it was received *for*. This money is not "YOUR" money, so it does not count for you providing your own support.
 - 529/1099-Q funds received in the tax year, regardless of what tax year it was received *for*. This money is not *YOUR* money, so it does not count for your providing your own support.
 - Gifts received from Aunt Mary (or the 350 a month from your parents in this case.) This money is not "your" money (because you didn't physically earn it) so it does not count for you providing your own support.

Money you borrowed from an accredited lender, in which you are the primary borrower and you are the primary person responsible for paying it back. (This money DOES count for you providing your own support.)
Money you earned through a W-2 job or self-employment during the tax year.  (this money DOES count for you providing your own support.)
Money in a bank account where you are the primary account holder on that account, and the money in that account was earned by you, regardless of when you earned it, even if you earned it years ago. (this money DOES count for you providing your own support.)
Inheritied money from a Last Will & Testament or a Life Insurance payout where you are the named beneficiary. (this money DOES count for you providing your own support, even though it's not reportable on a tax return, ever.)

THe above is used to determine if someone else can claim you as a dependent on their tax return, and that's the only thing it's used for. So do your parents qualify to claim you on their tax return? Understand I'm not asking you if they will or will not claim you. I'm asking you if they *QUALIFY* to claim you. Depending on the amount of scholarships, grants, 529 funds and gifts received, the amount of borrowed money disbursed to you by the lender in 2017, and the tuition and other support expenses paid (rent, food, transportation, utiites, etc.) it could go either way.

[mm195412]

Cool, based on your response no one can qualify to claim me, and I provided over half of my educational support. I have no 1099Q funds, had $2k in scholarships, have $10k in loans for which I am the primary borrower, earned $6k in wages, and received $4k support from my parents in the form of $350 a month. I paid all transportation myself (I do not have a car), and wages and loans went to all of my living expenses that the $350 didn't cover. Thanks!

[Carl]

Should be simple then. But understand you most likely will not get much in the way of education credits. I'm sure the $2K in scholarships did not cover your total tuition for the year. But the way it works with the IRS, is that the borrowed money will be applied to the outstanding qualified education expenses not paid by the scholarships, before your earned income will. Since borrowed money isn't your money, you won't get any big tax credits for it on the education side of things.
But the important thing to understand is, this is all speculation. You actually have to work through it and complete your tax return in it's entirety.
In the future, you won't get any more education related tax breaks until you start paying back the student loans. If they're qualified student loans, then you'll get a 1098-E each year starting the first year after you begin paying those loans back. The interest you pay on a qualified student loan will be tax deductible for you. But understand this:
If you default on your student loans, you can forget it. All tax breaks are gone permanently and forever, out the window.

[mm195412]

Isn't that the point of a refundable credit, that it is refundable beyond your earned income? Similar to the EITC? I thought they were pretty much subsidies for poor people. What is the point of a refundable credit if earned loans arent counted and are applied before income? I see no situation this could be refunded then, unless you took no loans, had no scholarships and made under the combination of your standard deduction and personal exemption.

[Carl]

You need to complete the tax return. Then, and only then will you know for sure if you qualify for the refundable portion. I suspect you won't. But when I put my two kids through collage we didn't borrow money. We cash flowed their living expenses and that portion of their tuition not covered by scholarships and grants. Because my household income was to high (and yours is not even close to being high) I didn't qualify for the AOC at all. So you very well may for all I know.
Also, don't go by what the program may tell you upon completion of the education section either. You have to complete the ENTIRE return, so the program has ALL of your information to work with, in determining what deductions and credits you actually qualify for.

[mm195412]

Thanks! I completed my ammended return, I just wanted to get a second opinion before mailing it in. I appreciate the help! I'm going for an accounting PhD and got a good undergrad GPA while working part time, so I expect to have good income in the future. Unfortunately I did not have much support besides loans I have to pay back and wages, so the extra 1k really helps.

[pmoustakas]

Just change the number of years you used it to 1.   There is a bug in turbo tax.

[Davidce2017]

You are wrong about not getting anything back from the AOTC. The AOTC is a refundable credit meaning even if you have no tax liability you still get $1000 back.