Hal AI and RaifH:
Thanks for your responses. By way of transparency, I am a retired tax professional preparing the returns for me and my child. I had phrased the question from the child's perspective to make it simpler.
The scenario you are describing is exactly my situation. My child is definitely eligible to be claimed on my return as a dependent, and she fails the earned income 50% support test. If I claim her as a dependent, I get a $500 child tax credit. However, if I do not claim her, I had thought (following Pub 970 linked by RaifH) that she could claim an AOC of $977, which is partially caused by the Kiddie tax -- for a net savings of $477 between the two returns. I ran that through TurboTax and got that result. So I want your view, and Turbo-Tax's software, to be correct, i.e., that a child can still claim a non-refundable AOC if the parents simply choose not to claim the child as a dependent.
However I was persuaded by, and am now troubled by, the language of section 25A(g)(3), which says "if a deduction under section 151 with respect to an individual [the child] IS ALLOWED to another taxpayer [the parent] . . . no credit shall be allowed under subsection (a) to such individual [the child]". (emphasis added). That "allowed" language seems to suggest that the child may not take the AOC if the parents are ALLOWED to claim her as a dependent, even if they voluntarily choose not to claim her. Are you aware of any specific guidance on this point, perhaps a regulation or ruling? Pub 970 suggests that a child may take the AOC if the parents voluntarily choose not to claim her, but the Code should prevail if inconsistent.
Sorry to get deep into the weeds on this, but if you have any thoughts, they would be much appreciated. Thank you!!!
