<p>DS graduated in May of 2013. He left home in June to take a paid internship, after 5 months he then relocated to another city for a career job making a good income. </p>
<p>I was hoping to claim him as a dependent and take the American Opportunity credit. However, Turbotax makes it clear I cannot claim him as he did not live with me, nor was a full-time student for 6 months or more. Therefore, I don't qualify for the AOC. </p>
<p>I then thought DS could take the credit. However, looking at the account, it seems that someone in my family (probably DS) accepted a financial aid package that included a grant and loans. Instead of paying the university, it seems DH paid off loans instead. Can payment towards loans count towards the AOC? </p>
<p>The first thing I would look at is whether you have already claimed the AOC for four tax years. If he graduated in May 2013, did he begin college in September 2009? Did you claim the AOC on your 2009, 2010, 2011 and 2012 tax returns? If so, then you’ve reached the limit and can instead consider the Lifetime Learning credit.</p>
<p>Besides what Madison85 said, the qualified education expenses for the AOC and probably LLC(I haven’t looked)have to be paid in the same tax year the credit is taken. So only expenses for spring 2013 paid with loans could be used for the AOC. So it’s the expenses in the tax year that are important, not the loan payments. </p>
<p>Paid with borrowed funds. You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student’s account.</p>
<p>So to rephrase my prior post for clarity(hopefully), no, payments toward loans don’t count toward the AOC. Expenses in the tax year paid with loans can count.</p>
<p>Thanks, very helpful. I can count the amount of loans that were paid towards 2013 expenses if they were paid in 2013. I can find that on the account. </p>
<p>Madison - I have only qualified for the AOC for 3 years so far. Thanks for bringing that up. </p>
<p>If the loans were applied directly by the school, the date they were applied is when the expenses were paid. Is this a paid/applied in December for the term beginning in January situation? If so, you can’t use those expenses for 2013.</p>
<p>I get more confused as I look at it. We were billed ($3845) in the fall for spring of 2013. We paid a sum in November (yes, I know we should have waited till January). A loan of $1631 and a grant of $959 were applied to the account in January for the balance. Do I then claim the 2013 charges by the University was $2590 (loan plus the grant) as opposed the the semester charge of $3845? Is the amount I can use for the AOC $672 (loan minus the grant)?</p>
<p>The $3845 was all for QEE? Tuition and mandatory fees? If so you had $1631 of QEE in 2013 for the AOC. The $959 grant and your Nov. payment(presumably $1255) reduced available QEE for 2013 to $1631 which was paid in January via the loan. If you have receipts you can add the cost of required books and supplies purchased in 2013 to that amount. </p>
<p>Thanks so much annoying dad. I think you are great, not annoying at all. Yes, the $3845 was all for QEE. I can add $790 that was charged in January for mandatory fees. Fortunately then, but unfortunately now, DS spent very little on books for the semester (hmm, maybe I should’ve questioned that). </p>
<p>As for dependency, this same adult child went to a state across the country in June for a paid internship, and stayed in a variety of temporary housing for 3 months while maintaining my house was his permanent residence. I certainly paid for over half of his expenses for the year. Can I claim him as my dependent even though he didn’t physically live here for more that 6 months?</p>
<p>Note the definition of student, full time for parts of 5 months. Note what are considered temporary absences. For business is kind of a broad one. See the support test worksheet on page 16. What is important is not how much your son earned but how much of his funds he spent on his own support. Items 1-5 of the worksheet ask about that.</p>