Claiming a dependent

[jamminyam]

If my child is 21 or older do I have to claim them as a dependent? They are a full time student. If I don't claim them they will get the "American Opportunity Tax Credit". I don't qualify for that credit. Will I get in trouble if I don't claim them so they can get the "American Opportunity Tax Credit"? Thanks. 

[leeloo]

If your child qualifies as your dependent, you must claim them. Omitting them from your return in order for them to reap a beneift they would not normally be entitled to, is not permitted.

https://turbotax.intuit.com/tax-tips/family/rules-for-claiming-a-dependent-on-your-tax-return/L8LODb...

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

[Hal_Al]

Q. Will I get in trouble if I don't claim them?

A.  No. You are allowed to forego claiming your student-dependent. But,  they still can't  get the "American Opportunity Tax Credit".  

While technically there is a provision that allows your student-dependent to claim a federal 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 (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support.  It is usually best if the parent claims that credit.  

If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit.  The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)

[jamminyam]

So if my child is working, she can get the AOTC tax credit because she has a tax liability as long as I don't claim her on my taxes. Is this correct? If I don't claim her on my taxes how do I do this in Turbo Tax? Do I exclude her completely? Or how do I answer the questions to make it so I am not claiming her?

[DianeW777]

It depends.  Keep in mind that it is not an optional choice.  Only one person is eligible to claim a dependent and if that is you, then even if you don't claim your student/child they must indicate on their return that someone else can claim them. This would eliminate the American opportunity tax credit (AOTC) for your child.  

The rules for claiming a dependent as a qualifying child are listed below.  If I had to guess, I would say that your obstacle will be whether your child paid more than half of their own support.

Qualifying child:

• They're related to you.
• They aren't claimed as a dependent by someone else.
• They're a US citizen, resident alien, national, or a Canadian or Mexican resident.
• They aren’t filing a joint return with their spouse.
• They're under the age of 19 (or 24 for full-time students).
  • There's no age limit for permanently and totally disabled children.
• They lived with you for more than half the year (exceptions apply).
• They didn't provide more than half of their own support for the year.

@jamminyam 

[Hal_Al]

Q. So if my child is working, she can get the AOTC tax credit because she has a tax liability as long as I don't claim her on my taxes. Is this correct?

A. Not exactly.  If she has a tax liability and you  don't claim her on your taxes, she can claim a non refundable credit up to her tax liability (and the credit limits).  Her working is not relevant, for the non refundable portion. 

She cannot claim the refundable portion (regardless of her dependent status) if:

1. He/she was:
.....a. Under age 18 at the end of 2023, or 
......b. Age 18 at the end of 2023 and his earned income (from working) was less than one-half of his support, or 
......c. A full-time student over age 18 and under age 24 at the end of 2023 and his earned income was less than one-half of his support .
2. At least one of his parents was alive at the end of 2023.
3. He is not filing a joint return with his spouse for 2023.