AOTC credits

[Kantah]

My 19 yo daughter, who is living at home, is a part time student (9 credits per semester) and works part time. She pays for her own college tuition and for transportation and personal expenses, but does not pay for other living expenses like housing and meals at home. Would she be able to claim AOTC credits as she is paying for her tuition herself? Or would she still be our dependent since we cover housing and food? 

[Hal_Al]

Q. Would she still be our dependent since we cover housing and food? 

A. Probably not, but it would depend on other info  (mostly how much income does she have). 

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.  They are interrelated but the rules are different for each.

The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

Since she is over 18 and NOT a full time student, she cannot be a QC.  So, next we look to see if she can be a Qualifying Relative (QR). 

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $4700 (2023) ($5050 for 2024).
3. The taxpayer must have provided more than 1/2 his support

In either case:

4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...

Q. Would she be able to claim AOTC credits  herself? 

A. Yes. But, only if she does not qualify to be your dependent.*

*While technically there is a provision that allows a student-dependent to claim a federal tuition credit, from a practical matter it seldom works out.  A student, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if she cannot be claimed as a dependent.  

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 he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)