Declaring my daughter as a dependent to take advantage of full American Opportunity Credit - (Form 8863)

[MartinV]

My 22-year-old daughter graduated with a BA degree from college (grand valley state university) on April 30, 2022 (full-time student), then took an additional class that spring to complete a minor degree with the same college, ending in June (part-time student). Can I still declare her as a dependent on my 2022 federal taxes since she was a student for at least six months even though not full time the entire six months? I'd like to go that route hoping I can still get the American Opportunity and Lifetime Learning Credits (Form 8863) on her behalf for the full $2,500 like she did last year (I transfer the full amount to her when I get my refund). I'm thinking if she files on her own, she will only get $1,500 for that credit.  I'm open to any advice I can get on claiming credits for college students. I have another daughter who is currently a full time student at the same college and I declare her as a dependent for the same reason. Both got $2,500 checks from me when my refund came through.

[Anonymous]

Thank you for participating in this event.

As long as your daughter meets the requirements to be your qualifying child or qualifying relative for the year, you can claim her as a dependent on your tax return and claim the education credits like American Opportunity Credit or the Lifetime Learning Credit. The following conditions must be met for you to claim her as  a qualifying child:

1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.

2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled.

3. The child must have lived with you for more than half of the year.²

4. The child must not have provided more than half of his or her own support for the year.

The child must not be filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid).

As you have mentioned that your daughter is 22 yrs old and a student, living away for college is an exception that does not disqualify you from claiming her as a dependent, she should not have provided for more than half her support. If she is taking out loans in her name, that is counted as support provided by her. And she should not claim herself if she is filing a tax return. 

Here are some helpful resources:

Rules for Claiming a Dependent on Your Tax Return 

Whom May I Claim as a Dependent? 

[Bsch4477]

Just a slight clarification of the excellent answer by @Anonymous.  Since she didn’t attend full time for 5 months in 2022 she will not be a “qualifying child” but she can be your dependent as a “qualifying relative” if she earned less than $4,400 and you provided more than half of her support. So, yes, you can claim the AOC if you have not claimed it for 4 years. Note that you can’t claim both the AOC and Lifetime Learning Credit for the same child. 

[Anonymous]

Thank you @Bsch4477 for the clarification.

[SuziM]

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[JoeD_CPA_CFP]

Hi Marvin V,

Thank you for the question and here is my opinion:

Dependent Status

For you to claim your child as a dependent, your child must be an eligible student and meet the following requirements:

• child is under age 24 at the end of the calendar year
• child is a full-time student for at least 5 months of the year
• child is enrolled in an eligible educational institution
• child does not provide more than 50% of their own annual support
• child does not file a joint return (except to claim a refund with no tax due)

NOTE: College student loans count as support by the person responsible for the loan repayment.

Based on your question, it looks like your daughter can be claimed as a dependent for 2022 if she meets all the requirements above.

American Opportunity Credit

For the purposes of you being able to claim the American Opportunity Credit, the following conditions must be met:

• The student must be enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential for at least one academic period beginning during the tax year. 
• your MAGI (modified adjusted gross income) must be $80,000 or less ($160,000 or less for joint filers) to claim the credit for the qualified expenses of an eligible student. The credit is reduced if  your MAGI exceeds those amounts. If your MAGI is greater than $90,000 ($180,000 for joint filers) you cannot claim any of the credit.
• you must not have not claimed the credit for more than 4 years for the student
• your child has not  been convicted of a federal or state felony drug offense at the end of the tax year

NOTE: The student must not have completed the first four years of post-secondary education at the beginning of the tax year– so grad students cannot take this credit. The credit is only available for qualified expenses (like-tuition, required fees and course materials). Here is a link for more information about education credits and qualified expenses.

If your concern is that the student became a graduate on April 30, 2022, which is only 4 months, the IRS says that if a student was an undergraduate student during the first part of the tax year and became a graduate student that same year, the American opportunity credit can be claimed for this student for qualified educational expenses paid during the entire tax year, if all other requirements are met by the student.

Hope this helps