For 2016,age 22,I paid kiddie tax and AMT.For 2017,not a student,TT shows I get a credit for the 2016 AMT. No 2017 earned income (only taxable grants).Is credit correct?

[vista25]

I am currently supported by taxable government research grants reported on form 1099-G, which are considered unearned income by the IRS.  In 2016, because I was under 24 and a full time student for 5 months, and the grants are considered unearned, I was subject to the Federal kiddie tax and AMT.

I understand that for 2017 as 23-yr-old who was not a full-time student at all during 2017, I am no longer subject to the kiddie tax on the grant income.  However, I am surprised that Turbo Tax shows that I can get a credit for the AMT I had to pay in 2016 under the kiddie tax rules. Specifically, on Form 8801 line 9, I am not sure I am entitled to show the full $53,900 as I am still under the age of 24 and did not have EARNED income in 2017.  Could you please confirm for me that I am truly entitled to the AMT credit?

[Critter · Accepted solution]

The program is correct. 

[vista25]

Thank you.  I have always followed whatever TT says, but sometimes I wonder if maybe I skipped a TT step or did not understand something TT was asking, thus resulting in an unexpected outcome, like this credit.  Do you have experience with this specific credit situation?

[Critter]

Yes, 26 years preparing taxes and thousands of returns.

[cpa-cfa]

The program is wrong. I just spent hours researching an almost identical issue but using H&R Block software. H&R Block has the same problem as TT. The H&R Block software does have a Note that you may need to override line 9. In your example, since you were subject to kiddie tax in 2016, you are not entitled to $53,900 but instead $7,400 plus 2016 earned income. From IRS instructions:   Line 9 - Don't enter more than the sum of your 2016 earned income plus $7,400 if you didn't file a joint return for 2016, at least one of your parents was alive at the end of 2016, and one of the following statements is true. 1. You were under age 18 at the end of 2016. 2. You were age 18 at the end of 2016 and didn't have earned income that was more than half of your support. 3. You were a full-time student at least age 19 but under age 24 at the end of 2016 and didn't have earned income that was more than half of your support.

[vista25]

Thank you.  With the guidance you provided in your answer, I was able to check the IRS guidelines and discovered that, indeed, this is a glitch in the Turbo Tax program.  I wonder how many Turbo Tax filers incorrectly claimed a credit based on this glitch.

[Critter]

I would think you are probably the only one who had this situation since it is so rare that one is hit with both the AMT & Kiddie Tax on the same return.  Since this is to rare they either don't know this is an issue or they don't care to spend any time or effort in fixing it.