CAN I CLAIM REFUNDABLE AOTC AS A STUDENT?
We get this question a lot!
A student who goes to college can claim the refundable part of the AOTC but only if they have earned income that is more than half of their support.
What does this mean?
LETS use an example:
Mike is 19 years old and is a full time student. He also works and made $17,000 for the Year that he used to pay for rent and food. Mike’s parents make too much to qualify for AOTC
Mike’s college tuition is $32,000. His Rent is $6,000 for the year. His Food cost $5,000. So the total Support is $43,000.
Now lets say Mike received Grants and Scholarships, that paid all of his tuition. Grants and Scholarships are excluded when counting support. So you can’t say Mike paid $32,000. Mike only earned $17,000 so that is the number that has to be used when figuring if he can get the refundable $1,000.
Even though Mike’s parents don’t pay for anything they can still claim him as their dependent because the rule is that the dependent didn’t pay for more than half of their own support.
But since Mike’s parent don’t get any benefit from claiming Mike as a dependent, they don’t claim him as a dependent.
When Mike files his return, he can claim the nonrefundable part of the AOTC, but none of the refundable part. So when the AOTC is applied, most likely Mike will owe nothing in taxes. But he will not be able to get the refundable part that could be worth $1,000.
What If Mike Earned More Money?
If Mike Earned more than $21,500 he could have claimed the refundable part of the AOTC.
The benefit of being a student and working at the same time is you might be able to get a free $1,000 credit!
Now all of this is on a case-by-case basis. Not everyone will have this same situation. You should call Us Here at Moontree Tax Service. We will help you figure out if you are in this situation and if it is better to let the college student file their own tax return.
ALL OF THIS CAN BE DEDUCED FROM PUB 970
PAGE 21 is critical to decide if you can claim refundable or not.
WE RECOMMEND COLLEGE STUDENTS AND PARENTS OF COLLEGE STUDENTS TO READ THIS.
