All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

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Valued Pioneer
Posts: 3
Registered: ‎03-09-2017
Accepted Solution

American Opportunity Credit Question

My cousin is a full time student and is eligible for the American Opportunity Credit.  She worked part time, and only made $4500 last year.  When I select the credit of $2500, her refund does not increase by that amount.  Is there a reason why the program is not reflecting the credit of $2500 after it is selected?  I also tried to see if the lesser Lifetime Education Credit would work, but the refund amount did not change.

Associate (Pioneer)
Posts: 13
Registered: ‎02-16-2017

Re: American Opportunity Credit Question

[ Edited ]

Hello Tiani22 and welcome to the community,

 

There are two parts to the American Opportunity Credit (AOC), non refundable and refundable. The non refundable part can only reduce the tax owed to 0, the refundable portion can add to a refund even with no taxes owed. With your cousin's income only being $4,500 she would only be eligible for the refundable portion, which is up to $1,000.

 

Also the American Opportunity Credit is for qualified education expenses out of pocket. Your cousin should get a 1098T from her school telling her how much was paid to the school (Box 1) and how much scholarship or grants the school received (Box 5). Generally if Box 5 is greater than Box 1 you are not eligible for the American Opportunity Credit.

 

It also sounds like your cousin might be a qualifying child of someone, likely parent(s). If she meets the following then she is considered a qualifying child and whoever is eligible to claim her would claim the AOC and would likely get more for the credit.

  • Full time student 23 or younger
  • She lived with them while not at school
  • She did not provide more than half of support
Tax Pro
Posts: 5,442
Registered: ‎02-23-2016

Re: American Opportunity Credit Question

[ Edited ]

Hi Tiana22,

 

Welcome to the H&R Block community.

 

Your cousin is only eligible for the $1,000 refundable portion of the credit.

 

The $1,500 non-refundable portion of the credit can only reduce tax liability to zero, it cannot result in any additional refund.  Therefore, with your cousin's income where it is, her tax liability is already $0, so she is not eligible for the non-refundable portion of the credit.

 

It's also important to note that if she can be claimed as a dependent your cousin is not eligible for any education credit whether or not she is claimed.  It's actually to her advantage to be claimed if someone can claim her because the non-refundable credit may help them and normally the parent or whomever can claim the child will give them the refundable part of the credit to help with college expenses.

 

If your cousin meets these criteria then she is someone else's dependent:

 

  • she lived with another taxpayer except for temporary absences for school
  • she was under 24 years old
  • she was in college full time
  • she provided less than 50% of her own support
  • she did not file a joint return with another taxpayer
  • she is related to the person who can claim her

 

If she does not meet all six of these criteria then your cousin should go ahead and claim her $1,000 American Opportunity Credit.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 3
Registered: ‎03-09-2017

Re: American Opportunity Credit Question

Thank you.  I am using the computer software to file her taxes. It is only giving me the option to select $2500 for the American Opportunity Credit or $2000 for the Lifetime Education Credit.  I cannot enter any other amount.  Her parents are not claiming her as a dependent. She did receive a 1098T, and that information has been entered. 

 

Is there a way to override the program and enter a credit for $1000.00?

 

Thank You

Valued Pioneer
Posts: 3
Registered: ‎03-09-2017

Re: American Opportunity Credit Question

Thank you, I got it figured out, and you were right, she is only going to get $1000 as her credit.  The reason it wasn't showing was because the box regarding her income and support was checked.  She is not receiving support from her family.  Once I unchecked the box, she received her credit.  Thank you for your help.

Highlighted
Tax Pro
Posts: 5,442
Registered: ‎02-23-2016

Re: American Opportunity Credit Question

You're quite welcome.