Q. If she can be claimed as a dependent, would that not disqualify her for the education credit?
A. Yes.
"Under her personal info.. it has single, can be claimed as dependent, full time student". After answering that she can be claimed as a dependent, you get a drop down asking if she will be claimed. You probably incorrectly answered no. Answer yes, unless you decide that the credit she gets is more than the dependent credit you get ($500).
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 full time student, under age 24, is only eligible for the refundable portion 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. This is worth up to $2500 (AOTC shifts to all non refundable)
