Dependent Eligibility and AOTC

[GaryBr2]

My son will be graduating from college this year.  If he's lucky enough to find a job and an apartment at some time in 2024, can I still claim him as a dependent and therefore still qualify for AOTC?  I typically pay some out-of-pocket tuition to qualify for AOTC and cover the remainder with 529 withdrawals. However, I think if I can't claim him as a dependent, I will not qualify for AOTC any longer.

[MonikaK1 · Accepted solution]

It depends. You can only claim the AOTC for four tax years. If 2024 is his graduation year, you might already have claimed it for the four previous years. If you claimed it the year he started as a freshman in the fall, then you may have already used it for four years.

Yes, you would need to be able to claim him as a dependent to qualify to take the credit on your return. 

To claim your child as your dependent, your child must meet either the qualifying child test or the qualifying relative test:

• To meet the qualifying child test, your child must be younger than you or your spouse if filing jointly and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year.
• There's no age limit if your child is "permanently and totally disabled" or meets the qualifying relative test.

To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:

• A full-time student at a school that has a regular teaching staff and course of study, and a regularly enrolled student body at the school; or
• A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency.

The 5 calendar months don't have to be consecutive.

Full-time student.

A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance.

See this IRS article for more information about the AOTC.

See IRS Publication 501 for more information about the rules for claiming dependents.

[GaryBr2]

We couldn't take the AOTC credit his freshman year so from a calendar standpoint I think we're ok.  But since he's graduating early (Mar 2024) it looks like he won't meet the 5 month rule. So, it looks like no AOTC credit this year.  I think he will no longer be a dependent anyway if he lives with us for less than 6 months and/or has a fulltime job.  Is that correct?

[MonikaK1]

Yes, if he is going to be a student for less than 5 months, then he won't be a "qualifying child". He could then only be a dependent if he meets the tests for an Other Dependent, which include the Gross Income test ($4,700 for 2023 and $5,050 for 2024) as well as residency.

Your son might be able to claim an education credit on his own return for 2024.

To be eligible for AOTC, the student must:

• Be pursuing a degree or other recognized education credential
• Be enrolled at least half time for at least one academic period* beginning in the tax year
• Not have finished the first four years of higher education at the beginning of the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Not have a felony drug conviction at the end of the tax year

*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. The schools determine the academic periods. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

Even if he doesn't qualify for the AOTC because he wasn't a student long enough, your son may be able to claim the Lifetime Learning Credit. See this IRS article for more information about the Lifetime Learning Credit.

[stantonporsche]

If I make too much money then there is no point in trying to get AOTC 

hence, if he files independently and makes only about 12K then he can get AOTC, right?

[AmyC]

Yes, with an income of 12k, there will not be a tax liability but the AOTC is refundable up to $1,000.