Can I Get Partial Refund on American Opportunity Tax Credit for Year 2019?

[smini081]

I recently realized that I never claimed the AOTC in year 2019 after my college business admin let me know that I was likely eligible that year.

I was a full time student in tax year 2019 at an eligible college. My worksheet tells me I had $14,000 in eligible education expenses that year.

My total wages + salaries for that year was $7,170 (my summer internship + on campus employment). Since it was below the standard deduction limit, I got ~$550 in federal tax return.

Here's my question - I thought that even if the tax credit exceeds the tax you owe, you can get a partial refund up to $1,000 through AOTC. TurboTax Desktop software shows that I can get $4,000 in tax deduction, but shows AOTC eligible credit as $0. Am I missing something? Am I not eligible to get any refund through AOTC in my situation? If you need more info to assess, I'd be more than happy to provide it. Help would be much appreciated!

[Bsch4477]

If you had living parents and did not earn more than half of your support you would not be eligible for the refundable portion of that credit even if your parents did not claim you as a dependent. 

[smini081]

Hey @Bsch4477 thanks for responding. Is there a section to indicate whether I earned more than half of my support? I don't see it under education credits section. Also, my parents paid for the tuition but they are not U.S. citizens, and I supported myself in most of my other life expense for further context

[Bsch4477]

If you only earned about $7,000 you certainly did not earn more than half of your support given that education expenses alone were about $14,000.  I don’t have the program in front of me but the appropriate questions were probably asked in the education credit section. 

[Hal_Al]

The earned income question is asked in the personal info section, after you indicate that you are a full time student under age 24 and are not claimed as a dependent. 

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. 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. 

You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.

Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863

[smini081]

Got it. I thought I would be able to claim it since the tuition was $14,253 (the portion I had to pay after scholarship), and I made $7,170 of taxable income that year. I also cannot be claimed by anyone else as a dependent since I am the only tax-paying member of my family (the rest of my family lives abroad and does not work in the U.S.). So if my scholarship + grant was $40,000+ then I don't qualify?

[Hal_Al]

Q.  So if my scholarship + grant was $40,000+ then I don't qualify?

A. That's not the reason you don't qualify.  There's a special rule, for full time students, under age 24, that disqualifies you for the refundable portion of the American Opportunity Credit.

Scholarships and grants that pay for qualified educational expenses (tution, fees, books, computer, and other course materials) are tax free. Scholarships  that pay for room and board and other living expenses is taxable income to you.  If taxable scholarship is added to your $7170 earned income, you may have enough income to have a tax liability. In that case, you can claim the American Opportunity Credit as a non-refundable credit (up to the full $2500).