Parents income too high to qualify for American Opportunity Credit of dependent. Why is son getting it though he doesn’t provide half of his own support and under 24.

[jayh3ltz]

We can claim him as dependent but will not be doing so. His earned income was just over $6300.  Line 7, Form 8863 indicates he can’t take refundable portion of credit because his earned income provides less than half his support. 

[PhyllisG]

If your son checked on his tax return, that he is not being claimed as a dependent, then he is allowed to claim the American Opportunity credit because he is also a student over age 23. He may be eligible for up to $1000 of the refundable American Opportunity (tuition) Credit. 

[jayh3ltz]

Son is under 19.  This is his first year of college. I don’t want to lose out on credit but I don’t want to take in error either.

[PhyllisG]

I misread your initial question.  I had seen the number 24 and thought he was over 23.  Your son would have to indicate on his tax return that he is being claimed as a dependent. Checking or not checking the dependency box determines who can claim the credit.  The Internal Revenue Service is strict on the dependency rules when claiming an education credit.

[Hal_Al]

You possibly missed the support question, on the students return. The earned income support question is part of the personal info interview, not  the education interview.

[Hal_Al]

Technically there is a provision that allows your son to claim a 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 if he/she supports himself by working .

If the student actually has a tax liability he can claim a non-refundable credit but then the parent must forgo claiming the student's dependency and the student still can’t claim himself.

[jayh3ltz]

If I answer ( within my son’s return) someone else can claim you on their return (his dad and I), but no one will claim you and answer “no” to “my earned income provided less than half my support” TurboTax gives him the refundable portion of American Opportunity Credit.  I don’t think this is right. His dad and I are willing to give him up as a dependent if he is eligible for the credit because it increases his refund more than it increases our payment due. I don’t want to have him file incorrectly.

[jayh3ltz]

I don’t think he is eligible because of support question. Why is TurboTax giving it to him.

[Hal_Al]

Check your answer to the parents living question.

Married students, filing jointly, are eligible for the refundable credit

[jayh3ltz]

I answered yes to parents living. We are. He is not married.

After playing with different options, if I answer “full-time” as enrollment status instead of “at least half-time”, (as indicated on Form 1098-T), it appears to calculate correctly.  (refundable portion of American Opportunity Credit not included in refund)   Why would enrollment status make a difference?  I would think earned income providing less than half his support would be the trigger.

[Hal_Al]

I agree. I tested it on my program and it does the same thing. I'll pass it along to the TurboTax people.

[Hal_Al]

Does your son have a tax liability exceeding $1500?  If so, check form 8863.  He will have more than $1500 on line 19, but line 8 (refundable portion) is blank. So,he's not really getting the same money as the refundable credit, just as a nonrefundable credit

[jayh3ltz]

Not enough income to create a tax liability. Line 19 of Form 8863 is zero. Line 8 is 1,000.