For AOC, if student increases AGI by $13,000 by declaring scholarships/Pell Grant as taxable, does she still lose refundable credit due to only $5K in "earned" income?

[sadonnellypohan]

Daughter only earned $5,000 in wages, but between that and scholarships and Pell grants which were converted to taxable income, as well as student loans, she surely did contribute more than 50% of her support. It therefore seems incredible that she should not be able to get the refundable portion of the American Opportunity credit.

[Vanessa]

If she is under 24, the IRS limits the AOTC to the nonrefundable portion only unless her earned income was more than 1/2 of her support. So the loans, scholarships and grants hurt her more than help her when it comes to claiming the AOTC. 

"You don't qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. 

1. You were: a. Under age 18 at the end of 2018, or 

b. Age 18 at the end of 2018 and your earned income (defined below) was less than one-half of your support (defined below), or 

c. Over age 18 and under age 24 at the end of 2018 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). 

2. At least one of your parents was alive at the end of 2018. 

3. You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2018." 

https://www.irs.gov/pub/irs-pdf/p970.pdf pg 21