AOTC credit

[ssh9]

My son started his freshman year in 2022 for bachelors degree. He is filing his tax return for 2022. His income in 2022 was below $10,000.00. So, he does not have a taxable income. His 1098-T box 1 has $7400 and box 5 has $4000. He also had more than $300 expense for books. He was and is a full time student in the university. Although we can claim him as dependent in our return, we are not claiming him as dependent in our return. He does not have any felony record. So, my understanding was that he would receive close to $1000 of AOTC. But, after all the questions and answers, Turbotax is saying that he is not eligible for education tax credit. Any idea why Turbotax is coming up with this? Should I enter something somewhere in the questions/answer section to determine it correctly?

[Bsch4477]

The reason is that he is not eligible for the refundable portion of the credit. And if he had no tax liability there is nothing for the credit to reduce.  The parent should take the credit if qualified to do so. 

[ssh9]

irs.gov says, "

The American opportunity tax credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. ". So, even if he does not have any tax liability, he should be eligible to get upto $1000 AOTC credit.

[Bsch4477]

Per IRS Instructions for Form 8863Education Credits (American Opportunity and Lifetime Learning Credits), on page 6:

Line 7

If you were under age 24 at the end of 2020 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, you can claim your allowed credit, figured in Part II, only as a nonrefundable credit to reduce your tax.

You don't qualify for a refundable American opportunity credit if 1 (a, b, or c), 2, and 3 below apply to you.

1. You were:
   a. Under age 18 at the end of 2020, or
   b. Age 18 at the end of 2020 and your earned income (defined later) was less than one-half of your support (defined later), or
   c. Over age 18 and under age 24 at the end of 2020 and a full-time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
2. At least one of your parents was alive at the end of 2020.
3. You're not filing a joint return for 2020.