There are two parts of the American Opportunity Credit; the first being the refundable potion (worth up to $1,000) and the non-refundable potion (worth up to $1,500).
As per 8863 instructions (page 6), taxpayers are not eligible for the refundable credit if all three of the following are true:
- You are under the age of 24 years old and provide less than 50% of your support
- At least one of your parents are alive
- Your filing status is not married filing joint
Therefore, what remains is the non-refundable portion of the AOTC, but it requires at least an income of $14,600 in 2024 to the eligible for the credit. Above that amount, the credit can only reduce your child's tax liability to zero. But, if the child's income is less that that amount, it is not worth taking the credit on their return.
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New York, Instructions IT-201, state that you are allowed to claim a dependent not taken on your federal return for purposes of the educational credit. New Jersey, however, does not seem to follow the same rules and doesn't allow you to claim dependents not on the federal return.
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