The money you hear about people
getting for just filing a tax return claiming kids requires you to ...
If you are a student, over age 23, and are not claimed as a
dependent by someone else (e.g. your parent) you may be eligible for the up to
$1000 refundable American Opportunity (tuition) Credit. That credit is not
dependent on having either kids or earned income. You must be at least a half
time undergraduate student and actually paid tuition (not just had it paid by
grants). Tuition paid by loans counts as paid by you (since you have to pay
that back, someday)
There is a tax “loophole” available. The student
reports all his scholarship, up to the amount needed to claim the American
opportunity credit, as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can
do this because that much tuition was no longer paid by "tax free"
scholarship. You cannot do this if the
school’s billing statement specifically shows the scholarships being applied to
tuition or if the conditions of the grant are that it be used to pay for
qualified expenses.
Using an example: Student has $10,000 in box 5 of the 1098-T
and $8000 in box 2.
At first glance he/she has $2000 of taxable income and nobody can claim the American
opportunity credit. But if she reports $6000 as income on her return, the tax filer can claim $4000 of qualified expenses on her return.
A child can be the “qualifying child” dependent of any close
relative in the household. If you live with someone else, e.g. your parents, it
may be better if they claim your child.
