Why am I not eligible for the AOC or the LLC when I have net tuition costs?

[Dudakia123]

I have W2 income of $5400, Federal taxes paid of $315.  I started as a Freshman in college in 2021 and went to school fulltime with tuition fees of $26,581 and scholarship of $9750. I have net college expenses of $17,506 but per Turbo Tax I am not eligible for the AOC or the LLC. I am not being claimed as a dependent on my parents tax return either.  So why am I not eligible to claim either of these credits?  

[MinhT1]

You should eligible for the AOC as you fulfill all the conditions.

There is  one caveat: You must provide more than half of your support if you are under 24. Otherwise, you must say that you can be claimed as a dependent by someone else, even if your parents do not claim you. In this case, you are not eligible for the refundable part of the AOC. The refundable part would not give you any benefits either as you have no tax liability due to your low income.

Otherwise, go through the student interview again. Read the questions slowly and carefully to make sure that you answer correctly.

Here are the eligibility tests.

To be eligible for AOTC, the student must:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period* beginning in the tax year
• Not have completed the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. The schools determine the academic periods. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

As for the LLC, it is a non-refundable credit and you would have no benefit from it as you have no tax liability.

[Edited 04/13/2022 ] 5:02 AM PST]

[NCperson]

Because of your income and status, you are not eligible for either tax credit. 

1) generally, if you are under 24, filing single and one of your parents is alive, you are not eligible for the REFUNDABLE portion of AOC. That would be $1000 in this case. 

2) to be eligible for the NON-refunable portion of AOC (or LLC) , then you must have a tax liability, In other words the non-refunable credit can't take Line 22 of Form 1040 below 0.  Since you income is less than $12,550 your tax liability is zero and therefore, there is no benefit available from either credit. 

I suspect you completed TT correctly. Why aren't your parents claiming you (unless their income is too high, they would be eligible for the $2500 AOC tax credit)

[Hal_Al]

With only $5400 of earned income, you don't have a tax liability to offset with a nonrefundable credit like the LLC or the non-refundable portion of the AOC.

As 2 others already indicated, you probably don't qualify for the refundable portion of the AOC.  

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. 

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

While technically there is a provision that allows a 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