Q. Can he get like $1000?
A. No. As others have said, he is ineligible for ANY of the refundable portion of the AOTC.
Q. In general does it make sense for me to claim him as dependent (not sure if I will get any benefit) and he will file taxes as he is earning?
A. Yes. Dependent children over age 16 are eligible for the $500 "Other Dependent Credit", instead of the Child Tax Credit.
Q. Or there are any advantages for him if I am not claiming him as dependent.
A. No. With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. However, he only qualifies for an education credit or deduction, if he is not a dependent*.
Q. Also I am thinking if it makes sense for my son to put all his money in Roth IRA?
A. Yes, put the maximum amount allowed in a Roth IRA ($7000 for 2024). His IRA contribution is further limited to his compensation (earned income).
Q. Also I am thinking if it makes sense for my son to put all his money in Roth IRA instead of paying tuition?
A. He can do both. A special tax rule allows the education credit to go to whoever claims it, regardless of who actually paid it. The student can claim the credit even if his parents paid the tuition. Different rules apply to tuition paid by scholarship.
*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. He cannot be supporting himself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit, if eligible.
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). A student with $8000 - $10,000 of income will not have a tax liability.
