I am 21 years old, both of my parents are alive, and I am filing as single. I imputed all this information in my TurboTax and it still says that I qualify. How can that be? I want to make sure that I am not going to get any money back that I am going to get audited for in the future.
Also on my Form 8863 it says Caution: if you were under age 24 at the end of the year and meet the conditions described n the instructions, you can't take the refundable American opportunity credit.
The IRS website says you do no qualify if the following applies...
Age 18 at the end of 2016 and your earned income (defined below) was less than one-half of your support (defined below), or
Over age 18 and under age 24 at the end of 2016 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below).
At least one of your parents was alive at the end of 2016.
You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2016.
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Did you elect "Someone else can claim me" when you answered the interview question in the TurboTax program?
If you did, you should not be able to apply for any education credits.
If you are a dependent of your parents, and they are claiming your exemption, your parents should report the 1098-T and apply for an education credit.
If you receive the credit, and the IRS decides you were not eligible, you could lose the ability to apply for a credit in the future.
Please look under your "Personal Info" and see if you checked "Someone else can claim me as a dependent on their tax return"
SEE SCREEN SHOT BELOW
Does anyone know the answer to the original question. I noticed last year my son got the American Credit when it seems like he shouldn't have. He didn't get it this year. So confused about this.
Rules for qualifying for the American Opportunity credit.
Who qualifies as a dependent:
The IRS rules for qualifying dependents cover just about every conceivable situation, from housekeepers to emancipated offspring.
Fortunately, most of us live simpler lives. The basic rules will cover almost everyone. Here’s how it all breaks down.
There are two types of dependents, each subject to different rules:
For both types of dependents, you’ll need to answer the following questions to determine if you can claim them.
Qualifying child
In addition to the qualifications above, to claim an exemption for your child, you must be able to answer "yes" to all of the following questions.
Qualifying relative
Many people provide support to their aging parents. But just because you mail your 78-year-old mother a check every once in a while doesn’t mean you can claim her as a dependent. Here is a checklist for determining whether your mom (or other relative) qualifies.
Who Should Take Education Tax Breaks: Parents or Students?
If the parent claims the education tax deduction or credit, then the child (in this case, the dependent) can’t claim it. If the child claims it for himself or herself, then the parent can’t claim it. Parents have to communicate with their kids since the education tax breaks are only allowed to be claimed on either one of your tax returns and not both.
First of all, you need to determine if the student is a dependent. If a parent claims his or her student as a dependent, then that’s who gets to take the tax credit or education deduction. Whether it’s the American Opportunity Tax Credit or the Lifetime Learning Credit, only one person gets the tax advantage and it often comes down to whether the student is a dependent in the eyes of the IRS. If a student is a dependent on someone else’s tax return, the student doesn’t qualify for these tax breaks.
If a student isn’t claimed as a dependent, though, it’s possible for him or her to claim an education tax credit, or take the deduction. One thing to keep in mind, each student cannot claim more than one tax break.
In some cases, it makes sense for the student to take the tax break. If the student is married, and no longer dependent on a parent for support, obviously that’s who should take the education tax break. Additionally, if the student makes enough money to owe taxes, it makes sense to reduce that tax bill as much as possible.
Most of the time, though, students don’t earn enough money to owe taxes. As a result, in many cases, it makes more sense for parents to claim their children as dependents and reap the benefits of the tax break. After all, parents have spent quite a lot to raise their children, and probably help pay for college. It’s only reasonable that they receive some sort of financial benefit in return – and a lower tax bill is one way to recoup a few of those costs.
He probably answered one of two questions wrong. At the personal info section he needs to tell TurboTax (TT) whether he is a full time student.
If TT detects that he is a FT student, under age 24, and unmarried, it will generate an additional interview question asking if his earned income was more than half his support (or some such wording).
It did ask if his income was more than half of his support. That's kinda a tricky question though. He does not make much. The scholarship pays for room and board and both parents do not work, so they don't file taxes. So he is dependent on himself. TT did not ask the question but another tax program did ask. TT just automatically gave him the credit. How is his "support" calculated? He does not make much but does not need much to live either.
Q. How is his "support" calculated?
A. 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
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.
Scholarships are excluded from the support calculation.
Q. The scholarship pays for room and board and both parents do not work, so they don't file taxes. So is he a dependent on himself?
A. No. Based on your brief description, he does not provide more than half his own support. But the only way to sure is to run the support calculation. Note that scholarships are not support provided by him.
Also note the dependent test is about overall support. The AOC question is about support from his earned income.
The best I can understand the room and board the scholarship pays is taxable and is used as income. I don't understand if he doesn't qualify for the credit why all the tax applications automatically add it.
Taxes are convoluted. Scholarships that pay for room and board are taxable income. But they're still scholarships for the support test and are not included in the support calculation.
Thank you!
Same issue here with turbo tax saying my daughter qualifies for American opportunity tax credit but line 7 makes it seem like she shouldn't. I think the distinction for us here is she is not quite full time. I already filed and that's the only distinction that actually qualifies her for the credit. Not sure if it's a weird loop hole but I wouldn't have claimed it if turbo tax didn't add it as a qualifying credit and my best guess is due to not quite full time status.
@Artinat Yes, it's a weird loop hole. Since she wasn't full time, she can claim the credit on her return, as long as she was not your dependent.
I didn't CLAIM her as my dependent but she is not quite self sustaining just yet. No one claims her as a dependent though so hopefully this is ok. I almost regret submitting it because I have doubts about the legitimacy of this credit ugh... I've read everything I could read on this and it seems that as long as she is not CLAIMED as a dependent on anyone's tax return, she is eligible. THanks!
To claim the American Opportunity Credit, a student must be 'at least half-time' so your daughter may qualify.
Here's more detailed info on the American Opportunity Credit.
She is over half time but not quite full time. Fingers crossed this is ok. Thank you!
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