American Opportunity Credit and scholarship income question

Paying for College
1

<p>Hello everyone,</p>

<p>I have a question about American Opportunity Credit.</p>

<p>Here is my situation: under 24, single, independent. I have some grants and a scholarship and I took out a loan to pay for my education and related expenses. As a whole my financial aid does exceed my tuition and fees.</p>

<p>And here is my question: do you think I can report the excess of scholarship as income on my tax return and the amount of tuition paid with loans for American Opportunity Credit? My university allows me to see which money they applied towards tuition and fees and which money was deposited to my bank account. In my case, they first applied the loan money towards tuition and deposited the leftover of the scholarship money.</p>

<p>So far I want to do the following: report the excess taxable part of the scholarship as additional income (after I deduct the cost of books) and claim the portion paid with the loan for the American Opportunity Credit purposes.</p>

2

<p>

Yes you could do that.</p>

3

<p>Also note that the AOC can only be claimed with respect to the first four postsecondary education years and for no more than four tax years.</p>

4

<p>A portion of the credit (40%) is refundable only if certain conditions are met.</p>

<p>If you are over 18 and under 24, a full-time student, and filing as single, then your earned income must be more than 50% of your support in order to receive the refundable part of the credit.</p>

<p>See IRS Publication 970.</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf&lt;/a&gt;&lt;/p&gt;

5

<p>Thank you everybody. I wasn’t sure if I researched all the rules regarding it. This makes my next tax refund much better.</p>

6

<p>So, if your earned income from personal services does not exceed 50% of your support, then the only part of the credit you will receive is the part that offsets your income taxes. If your income tax liability is $100, then you will get an AOC of $100.</p>

<p>Since you are almost 24; have you or your parents already claimed either the Hope Credit or the AOC in four tax returns, or has your postsecondary education already spanned four years? If so, then you may only be eligible for the Lifetime Learning Credit.</p>

<p>Look at the instructions on Form 8863, specifically for Part I, line 7 regarding the support test.</p>

<p><a href=“http://www.irs.gov/pub/irs-pdf/i8863.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/i8863.pdf&lt;/a&gt;&lt;/p&gt;

<p>Does your earned income from personal services performed (not loans and scholarships) exceed 50% of the cost of your food, shelter, clothing, education, medical and dental expenses and insurance? Again, if it does not, you cannot get the up to $1,000 refundable portion of the AOC.</p>

7

<p>Yeah, I know all these rules, thank you (I actually intend to get a grad degree in tax) :slight_smile: And I’m not a dependent of my parents’.</p>

8

<p>You may not be a dependent of your parents, but your earned income has to be over 50% of your support for AOC purposes. So it sounds like you earned many thousands of dollars in 2013 (enough for your food, shelter, tuition, health insurance, clothing?)</p>