Independent Student Eligiblity for American Opportunity Credit

Forum|Forum|2 years ago
May 10, 2024
2 replies
14 views

An 18 year old left home in the beginning of June 2023 to remove themselves from an untenable home situation and has not had any contact with their parents since. From June through August, the student provided household services to someone for room and board. In September, they started college full-time and worked via a work study program. The student earned income and took out student loans. The student lives in the dorms full time including breaks and summer. The student has earned income though it is not a lot. However, that is this person's only income and in addition to the student loans their only income. My question is since this student has been independent for 6.75 to 7 months of 2023 and does earn income, would the income be considered exceeding half their support when student loans are paying for some of their costs and are higher that the income? The student also receives scholarship which is accounted for on the 1098-T. Thank you.

ProSeries Basic

This topic has been closed for replies.

T

TaxGuyBill

Level 15

Have you estimated the total cost of support for the ENTIRE year?

I suspect that between the parents paying for the first five months and the student loans, it seems unlikely that the student paid for over half of their own support with earned income.

M

me-carneyAuthor

Level 4

Thank you for your reply.

I somehow was thinking half the year and not the entire year. She did not earn half of her support for the entire year.

Fast forward, for 2024 she will be on her own the entire year and have to support herself. She still will not have a lot of earned income, but more than 2023. She will live in the dorm for the entire calendar year, will have student loans, scholarships and grants. Will she be eligible for the AOC? It is the "earned" that makes me question this as the loans, scholarships and grants are subsidies.

Thank you.

T

TaxGuyBill

Level 15

I assume you are asking about the "refundable" portion because the earned income rule doesn't apply to the non-refundable portion.

For 2024, you'll need to run the numbers when you know the total cost of support and the earned income.

In regards to scholarships and grants have special rules in regards to support (see §152(f)(5)). I've seen a professional organization's article interpret it one way, but I interpret it another way, so that could be a bit tricky.

T

Terry53029

Intuit Community Champion

if the student loan is in the student's name it is considered support provided by student. Along with his earned income I would lean in the direction that he provided more than half of his support.

M

me-carneyAuthor

Level 4

Ok so the student loans are considered support from the student even though not technically earned. The scholarships and grants are considered support. In her case the scholarships and grants are more that the loans and her income. As it stands now, she is not eligible for the AOC. Depending on the numbers in 2024, which may be the same or may be different, eligibility will be determined.

Thanks.

T

Terry53029

Intuit Community Champion

Loans have nothing to do with the AOC. Tuition is what the credit is computed on. If grants and scholarships are more than tuition then no credit. Some times if scholarship is allowed to be used for room and board you can use the scholarship for the room and board, then if grants and leftover scholarship is less than tuition you can take credit

Sign up

Login with SSO

Let's get you signed in

Login with SSO