Q. So, one hypothetical question... if our son was working and had earned income, say $15000 in 2023, was the above situation changed? was he eligible to get AOTC benefit?
A. No. The $15,000 would have to be more than half his total support for the year, in order to qualify for the refundable AOTC.
Q. Is it benefit for us to withdraw 529 payments on his name instead of my name, as our AGI will not make us qualify for any education credits.
A. No. The fact that you don't qualify for a tuition credit is not relevant to the separate issue of who should be the recipient of the 529 distribution.
Q. Is it benefit for us to withdraw 529 payments on his name instead of my name.
A. Simple answer: No. The kiddie tax will apply, so any taxable portion of the 529 distribution will mostly be taxed at the parent's tax rate. Depending on the numbers, the first $1250 may be taxed at the student's rate.
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).
