<p>Can I run this scenario by you folks for comment.</p>
<p>My daughter graduated in 2012 and started a new job in september 2012 earning $13.5K for the year. We are not claiming her as a dependent and will have her claim the tuition expenses in order to benefit from the AOC. Our income makes us ineligible for any of the tuition credits or deductions. (We did receive the AOC for 2009 and 2010.) We are also subject to AMT so claiming her as a dependent is of no tax benefit. Am I correct that since she made $13.5 K during the year, she is eligible for the AOC as long as our support was no more than $27K for the year (her earned income can not be less than half of the support she received). </p>
<p>To calculate our support I am adding our tuition payments for Spring 2012 paid in Jan 2012 at $3k, rent/food payments while in school at $3K and an estimated rent "fair market value" plus food while she lived at home for the rest of the year at $5.5K. This totals $11.5K. Even if I were to figure the value of her portion on our health insurance, the total would be less than $27K.</p>
<p>For 2012 education expenses I am reporting our $3K payment, plus D's $3.7K Stafford loan funds which were disbursed in Jan 2012, plus books of $173, less a $900 credit in 2012 for a meal plan that was cancelled and another $500 credit for total expenses of $5504. The H&R Block tax software calculates that she is eligible for the $1000 refundable portion and the $1500 non-refundable portion is applied against the taxes that she would otherwise owe.</p>
<p>Thanks in advance for any opinions as to whether or not I am doing this correctly!</p>
<p>I think she can claim the credit;the only thing I’ve always questioned is whether the child has to prove that she paid the tuition or is it good enough that tuition was billed to her even if someone else paid it. Maybe someone else will know better than me, but it looks like you are thinking it through correctly.</p>
<p>She only needs to have paid $4000 to qualify for the full credit. I don’t see how they can deny that she contributed that much with the Stafford loan that belongs to her.</p>
No. Her contribution must be at least half of total support. And in order for a student under the age of 24 to receive the refundable portion, she must have paid at least half of her support from earned income.</p>
<p>According to the IRS publication below, the criteria in question with regards to who cannot claim AOC credit is that the person is not claimed as dependent on another person’s income tax return. The way I understand it, to be claimed as dependent for a child, he/she must receive more than half of her support from the parents, but still you do not need to be claimed as dependent if you do have more than half of the support from the parents. So, if you are not claimed as a dependent on the parents income tax and you paid more than $4000 of your money on undergrad education, you are eligible to get the full AOC.</p>
<p>1098T does not usually cover all college expenses, it is just to satisfy federal regulations. Just like any other deductions you claim, I think it is ok to claim other expenses if they are legitimate, allowed by the rules, and you clearly have documents to support them.</p>
<p>Thanks for the feedback. I do understand that the key is figuring the relationship between her earned income and the “support” she received. And I do now understand that support (defined as food, clothing, shelter, education etc.) includes expenses covered by parents and the student (or anyone else). So I have refigured her total support to include the loans and grants that my daughter received. This still only brings total support to just under $17K. So using the $27K as the upper limit of support she could receive to still qualify still gives an additional $10K leeway of “support” expenses for things like health insurance or other incidentals that I have not quantified. </p>
<p>3bm103 - while your response answered “No” I think we are saying the same thing “Her contribution must be at least half of total support” (which is how the IRS states it) is the same as the way I am stating it - “Total support can be no more than twice her contribution, (defined as earned income)”. I guess I am looking at this from the different direction because I know what her earned income is and it is more difficult to quantify total support. So I wanted to feel comfortable that I was well within the definition for her to qualify. Since I have been able to quantify support as at least $17K, I know I have another $10K cushion before she would not qualify.</p>
<p>flyaround - schools can either report expenses billed or expenses paid (Box 1 or Box 2). So if they report in Box 2 as expenses billed you may not receive a 1098-T for the final spring semester. I did go through the exercise of looking at the 1098T for 2011 for expenses billed, subtracted what I paid in 2011 and verified that the “balance” was in fact what was paid in 2012. My tax software states that it is allowable to report expenses paid in 2012 but reported on a 2011 1098T.</p>
<p>Any yes the 1098T does nor report all expenses. The AOC allows you to include the expense of books or other required fees.</p>
<p>You are using the calculation to determine whether you can claim your D as a dependent. You don’t need to do this calculation for her to claim the AOC. You just need to not claim her as a dependent. There is no test for this - you just decide not to do it. If she made enough money to file a tax return and is not a dependent on someone else’s return, she can take the credit.</p>
<p>^^^Actually, to be able to claim the refundable part of the credit, she does need to have provided >50% of her own support from earned income (if she is under 24). It is one of the weird little AOC rules. I think that is what the OP is thinking of.</p>