I finally understand this process and found a great article explaining it even more. However, what I did not consider was that taking the credit and increasing my daughters unearned income to do so, may mess her up on the FAFSA. The AOTC will make our income almost $5000 higher and her income will be $5000 higher on the FAFSA. She receives a grant from her school based on the FAFSA numbers. Just wanted to share this in case anyone else in a similar "boat" reads this. All angles need to be considered. I already filed taking the credit but am now second guessing myself since the credits for my children are less than the grant she receives.
