Education Credit – Parents Don’t Claim
There is an often-overlooked opportunity to claim at least a portion of the American Opportunity Tax Credit (AOTC)when the parents’ AGI is too high to claim the credit. The regulations provide that if a taxpayer is eligible to, but does not claim a student as a dependent, only the student can claim the education credit for the student’s qualified tuition and related expenses. (Reg § 1.25A-1(f))
Refundability
40% of the AOTC (after application of the phase-out limitation) is refundable. (Code Sec 25A(i))
However, the refundable provision does not apply to a taxpayer who is a child subject to the kiddie tax rules (a qualified child). Generally:
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Any child under age 18, or 18 or over and under age 24 who is a student,
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Whose earned income is less than one-half of the child’s support,
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Who has at least one living parent, and
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Who does not file a joint return.
May be subject to the “kiddie tax,” depending on the amount of the child’s investment income. (Com Report; Chief Counsel Advice 201509030)
Thus, if a parent does not claim the child as a dependent and the child is not self-supporting, the child can claim the credit, but not the refundable portion.
