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Use1
Level 1

Qualification for education tax break. No income

I am trying to qualify for the education tax break but I do not have a w2. I am about to finish my taxes, but do not know how else I can get this tax break? I meet all other qualifications except the w2 income part.

 

What other things might I already have that makes me qualify?

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5 Replies
JohnW152
Expert Alumni

Qualification for education tax break. No income

Generally, you need some earned income to qualify for the refundable part of the American Opportunity Credit.  Without it, you can’t claim the credit.

You won’t be eligible for the refundable part of the credit if you were

  • Age 18 at the end of 2021 and your earned income was less than one-half of your support, or 

  • Over age 18 and under age 24 at the end of 2021 and a full-time student and your earned income was less than one-half of your support.

See Earned income in the 2021 Instructions for Form 8863 for information.

Hal_Al
Level 15

Qualification for education tax break. No income

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent claims that credit. 

You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.

 

Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863

 

If you are eligible, you have answered  something wrong, in the interview. But, a lot of people are just not eligible. See https://www.irs.gov/Individuals/AOTC

Use1
Level 1

Qualification for education tax break. No income

How about other proof of income instead of w2? I am speaking hypothetically, like if there was a stock investment made and this generated income. I am wondering if other forms of income would be able to make me as the student qualify if I did have other income in this scenario. 

Vanessa A
Expert Alumni

Qualification for education tax break. No income

No, if you had investment income that you were able to support yourself with, that would not count as income for the education credits. See @Hal_Al explanation below.

 

Edited 2/24/2022 @ 7:59AM PST @Use1 

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Hal_Al
Level 15

Qualification for education tax break. No income

Q. How about other proof of income instead of w2? I am speaking hypothetically, like if there was a stock investment made and this generated income? 

A. No, that's no good.  It must be "earned income" wages or self employment.

 

You don't qualify for a refundable American opportunity credit if 1 (a, b, or c), 2, and 3 below apply to you.

1. You were:
a. Under age 18 at the end of 2021, or
b. Age 18 at the end of 2021 and your earned income (defined later) was less than one-half of your support (defined later), or
c. Over age 18 and under age 24 at the end of 2021 and a full-time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
2. At least one of your parents was alive at the end of 2021.
3. You're not filing a joint return for 2021.

 

Earned income (as defined at previously provided link)

 Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Earned income includes the part of any scholarship or fellowship grant that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship grant. Earned income doesn't include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered.

If you're a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). However, if capital isn't an income-producing factor and your personal services produced the business income, the 30% limit doesn't apply.

 

 
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