For AOC, if student increases AGI by $13,000 by declaring scholarships/Pell Grant as taxable, does she still lose refundable credit due to only $5K in "earned" income?

Forum|Forum|7 years ago
June 3, 2019
1 reply
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Daughter only earned $5,000 in wages, but between that and scholarships and Pell grants which were converted to taxable income, as well as student loans, she surely did contribute more than 50% of her support. It therefore seems incredible that she should not be able to get the refundable portion of the American Opportunity credit.

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Vanessa11_2

Level 13

If she is under 24, the IRS limits the AOTC to the nonrefundable portion only unless her earned income was more than 1/2 of her support. So the loans, scholarships and grants hurt her more than help her when it comes to claiming the AOTC.

"You don't qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you.

1. You were: a. Under age 18 at the end of 2018, or

b. Age 18 at the end of 2018 and your earned income (defined below) was less than one-half of your support (defined below), or

c. Over age 18 and under age 24 at the end of 2018 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below).

2. At least one of your parents was alive at the end of 2018.

3. You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2018."

https://www.irs.gov/pub/irs-pdf/p970.pdf pg 21

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