Q. One more question, is claiming the AOC optional?
A. Yes. But, you really need to explain what you are trying to accomplish. In particular, it is only somewhat optional whether you or the student claims the credit.
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 (up tp $1000) of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit.
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.
