The questions you are asking usually indicates that you are trying to let your daughter claim the tuition credit. It does not matter whether the student or the parent actually pays for the college expenses. What matters is whether the student qualifies as the parent's dependent. The tuition tax credit goes with the dependency. If the student qualifies as a dependent, the parent claims the tuition credit, even if the student paid her own tuition.
If the student is not a dependent, she can claim the tuition credit on her own tax return. If she is under 24, there is an earned income requirement for the refundable credit.
A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if she supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.
You cannot claim the (up to) $1000 refundable credit if you are, or can be, claimed as a dependent by someone else.
Reference: Line 7 instructions for form 8863.
https://www.irs.gov/instructions/i8863#en_US_2024_publink53002gd0e674
https://www.irs.gov/instructions/i8863
The law was written this way to specifically prevent shifting the AOTC to the student because the parent is not eligible).
So, the student paying more than 50% of her college expenses, with earned income, is not enough. She must pay more than half her total support, including home expenses, with earned income.
If the student actually has a tax liability, there is a provision to allow her 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 she can be claimed as a dependent, on her return. This is worth up to $2500 (AOTC shifts to all non refundable)
