Q. So, we removed the 1098T from his taxes and add it to our household taxes and we do not get any deductions either. How is this possible?
A. In order for you to claim the tuition credit, you must be claiming the student as your dependent. There is also an income limit ($180K married filing jointly)
Q. My oldest son is 20 yrs old and filing his own taxes for 2022. He made approx 20k in 2022. He is a full time student.
A. He's most likely answered something wrong in the interview.
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 if he 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. Look for the support question, in the personal info interview.
But, with $20K income, he should have enough tax liability to get some credit.
*Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863
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The question you didn't ask is: Can you claim him as a dependent.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
- He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
- He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
- He lived with the parent (including temporary absences such as away at school) for more than half the year
So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on himself.
The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf
Furthermore, there is a rule that says IF somebody else CAN claim him as a dependent, he is not allowed to claim himself. If he has sufficient income (usually more than $12,950), he can & should still file taxes. In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section. TT will check that box on form 1040.
Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.
With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. However, you only qualify for an education credit or deduction, if you are not a dependent.
