DianeW777
Expert Alumni

Education

Scholarships do not have to be considered as part of earned income unless it represents payment to the student as indicated below. Likewise unemployment is not mentioned in earned income as defined in IRS Publication 970 for the AOTC.

 

If you are referring to the items that would disqualify the AOTC, specifically 'Age 18 at the end of 2021 and your earned income (defined below) was less than one-half of your support', see the definition below. Total support is a different matter in regards to claiming a dependent on the tax return.

 

Earned income. Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. Earned income includes the part of any scholarship or fellowship grant that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship grant. 

 

Support. Your support includes food, shelter, clothing, medical and dental care, education, and the like. Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. However, a scholarship received by you isn't considered support if you are a full-time student.

 

 

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