I completed the 1098T form for my dependent but then the $500 credit for other dependents disappeared. Is he still counted as my dependent?

[nicholashall155]

For clarification, my son is a qualifying relative for credit for other dependents. He would be a qualifying child apart from the condition of not staying with me for more than 6 months (my ex-husband cannot claim him as a dependent fyi). 

No matter what I do, whenever i finish the 1098T form, the credit for the other dependents always disappears. But then under "my info" it still says he is a dependent. Please help!

Edit: On the 1040 review form, the checkbox for credit for other dependent is checked. So what happened to the $500?

[Hal_Al]

It's sounds like your tax liability (line 11b of form 1040) is low enough that it is only taking one tax credit to get your tax to zero. 

That said, it's usually the education (tuition) credit that goes away, not the credit for other dependents.  You have to look at the form 1040, to see what's going on.  Look at lines 11b, 13a & 13b of form 1040 and lines 3 and 7 of Schedule 3.

[nicholashall155]

By tuition credit do you mean education credit? From the 1098T form, it says I qualify for the American Opportunity Tax credit. Do you know if this is applied after or before the credit for other dependents? That could explain how it reached 0, and then the $500 from credit for other dependents couldn't be used. Do let me know your thoughts, thanks!

[Hal_Al · Accepted solution]

You have to look at the forms. 

I believe (but haven't tested it) that the credit for other dependents is applied before the education credit. 

The American Opportunity Tax credit (AOTC) comes in two parts, refundable (line 18c of form 1040) and non refundable (line 3 of Schedule 3, then to 13b of form 1040).  If the non refundable credit is limited by your tax liability, TT  will complete a Credit Limit Worksheet before entering an amount on line 19 of form 8863.  That amounts goes to line 3 of Schedule 3.

[Carl]

One thing jumped out at me while reading your post, that I want to point out in case others over looked it. It's also possible I am not interpreting it correctly.

He would be a qualifying child apart from the condition of not staying with me for more than 6 months

It's my understanding that if you do not report the student lived with you "the whole year" then you the parent don't get any education credits for that student. Be aware that time spent away for the primary purpose of attending school is considered as time the student lived with you. So you probably should be indicating that the student lived with you "the whole year".

As stated before, once your tax liability gets to zero, that's it. You can claim all the additional dependent credits you want. But you don't get refunded back to you, that which you never paid in. (don't confuse the dependent credit with the refundable portion of the AOTC either please.)

[nicholashall155]

Upon review of the 1040 and the sections you told me, it seems the credit for other dependents is counted after. I am okay with not receiving the $500. Just to make sure, my son is still counted as a dependent even if we don't receive the $500? (but would receive it if not for the AOTC exisiting)

Also, for the AOTC - the system says I need to upgrade to deluxe, will I not receive the education credit if I do not upgrade?  Thank you for you replies and I look back to hearing from you.

[nicholashall155]

Hi Carl, My son has lived with me for about 1 month, and about 5 months in college, hence 6 months total. My son spent slightly more than half the year with his father, internationally. I understand how the tax liability works that you mentioned, as well as how 40% of the AOTC is refundable even if the tax liability is 0.

My question is you said "It's my understanding that if you do not report the student lived with you "the whole year" then you the parent don't get any education credits for that student." Where did you find this? Apologies but I have been spending a hefty amount of time searching for this condition through IRS documents and instructions, but could not find it anywhere. On the AOTC IRS page, there are no such requirments https://www.irs.gov/credits-deductions/individuals/aotc. If you mean for all education credits, then I cannot find anything endorsing or contradicting your statement and would like to know where you found this rule?

If this was a rule however, then I would have thought Turbo Tax would automatically disqualify me from the AOTC? I did put in my turbo tax that my son was with me for 6 months (less than the 183 days required) and yet it said I still qualify for the AOTC. Thank you and I look forward to hearing back from you!

Edit: are you thinking of this in terms of being a dependent? I know if my son is not a dependent, I cannot get education credits. However, my son is still my dependent even without living with me for half the year. Yes, my son does not qualify for the "qualifying child" for not staying with me for more than half the year. However, he does qualify for "qualifying relative" which does not have the half year requirement. 

[Hal_Al]

Also, for the AOTC - the system says I need to upgrade to deluxe, will I not receive the education credit if I do not upgrade? 

That's correct, you need to upgrade.

TurboTax also has another free product called the Free File Edition (not to be confused with the regular Free Edition).  It has free Federal preparation and free State preparation. There is no efiling fee. It is not available after October 15

The Free file Edition can handle the education credit.

The Free file Edition is more fully-featured than the regular Free Edition.  The Free File Edition can prepare Schedule A, C, D, E, and F that the Free Edition cannot. 

For Free File Edition a user needs to meet only ONE of these qualifications:

•      AGI of $36,000 or less
•      or active duty military (including Reservists and National Guard) with a military-issued W-2 and a 2019 AGI of $69,000 or less
•      or eligible for the Earned Income Credit (EIC aka EITC).

The FREE FILE Edition is located at:
https://turbotax.intuit.com/taxfreedom

How to switch and start over in Free file Edition
https://ttlc.intuit.com/questions/2026912-how-do-i-switch-to-turbotax-freedom-edition

[nicholashall155]

Thank you so much for your response. Unfortunately I do not qualify. That is okay I will use deluxe. Also before I mentioned about the credit for other dependents. If I don't receive the $500, but would receive it if not for the tax liability reaching 0, is he still my dependent? This is important for me regarding some private college scholarships.

[Hal_Al]

Yes, he's still your dependent. He'll be listed in the dependent section of form 1040, withe the Credit for Other Dependents box checked, even though line 13a is 0 or blank.