Education 24

[bekzm]

Ok - another education question which I'm sure has been covered and did do a search but did not find.
A 21 year old is living on own and is paying her way through college.
Can get the credit but not the refund out of the $4000 taken - made good money working part time and going to school full time. I was impressed.

It is sad she could use the extra but don't get it so I am correct - yes.
Credit - yes
Refund - no

Thanks
Can't wait till 14th....if sunny might see buff of smoke in the sky for overload....got to love this job and hope others are having a much fun....

[solomon]

Why no refund?

[Gene V]

credit?

I'm not sure how to interpret this--does all three of the items have to apply in order not to
get the credit or if one of the three does not apply, then you get the credit.

Refundable American Opportunity Credit
Line 13
If you were under age 24 at the end of 2010 and the conditions
listed below apply to you, you cannot claim any part of the
American opportunity credit as a refundable credit on your tax
return. Instead, your allowed credit, which is figured in Part IV,
will be used to reduce your tax as a nonrefundable credit only.

You do not qualify for a refund if 1(a, b, or c), 2, and 3 below apply to you.

1. You were:
a. Under age 18 at the end of 2010, or
b. Age 18 at the end of 2010 and your earned income
(defined below) was less than one-half of your support
(defined later), or
c. A full-time student over age 18 and under age 24 at the
end of 2010 and your earned income (defined below) was
less than one-half of your support (defined later).

2. At least one of your parents was alive at the end of 2010.

3. You are not filing a joint return for 2010.

[solomon]

I'm not sure how to interpret this--does all three of the items have to apply in order not to
get the credit or if one of the three does not apply, then you get the credit.

Refundable American Opportunity Credit
Line 13
If you were under age 24 at the end of 2010 and the conditions
listed below apply to you, you cannot claim any part of the
American opportunity credit as a refundable credit on your tax
return. Instead, your allowed credit, which is figured in Part IV,
will be used to reduce your tax as a nonrefundable credit only.

You do not qualify for a refund if 1(a, b, or c), 2, and 3 below apply to you.

1. You were:
a. Under age 18 at the end of 2010, or
b. Age 18 at the end of 2010 and your earned income
(defined below) was less than one-half of your support
(defined later), or
c. A full-time student over age 18 and under age 24 at the
end of 2010 and your earned income (defined below) was
less than one-half of your support (defined later).

2. At least one of your parents was alive at the end of 2010.

3. You are not filing a joint return for 2010.

Regarding number 2 - a parent being alive - does not appear in Pub. 970 which carries more weight than the instructions to the form. Also, the instructions state "2, and 3" not 2 or 3.

http://www.irs.gov/pub/irs-pdf/p970.pdf

In the original post, the qualifying child rules do not apply.

[Gene V]

Solomon

Regarding number 2 - a parent being alive - does not appear in Pub. 970 which carries more weight than the instructions to the form. Certainly does not appear in the Law. Also, the instructions state "2, and 3" not 2 or 3.

http://www.irs.gov/pub/irs-pdf/p970.pdf

In the original post, the qualifying child rules do not apply.

I'll have to disagree with you about parent not appearing in Pub. 970.

from Pub. 970 page 15

Refundable Part of Credit
Forty percent of the American opportunity credit is refund- able for most taxpayers. However, if you were under age
24 at the end of 2010 and the conditions listed below apply
to you, you cannot claim any part of the American opportunity
credit as a refundable credit on your tax return. In-
stead, your allowed credit (figured on Form 8863, Part IV)
will be used to reduce your tax as a nonrefundable credit
only.
You do not qualify for a refund if items 1 (a, b, or c), 2,
and 3 below apply to you.

1. You were:
a. Under age 18 at the end of 2010, or
b. Age 18 at the end of 2010 and your earned in(
come (defined below) was less than one-half of
your support (defined below), or
c. A full-time student over age 18 and under age 24
at the end of 2010 and your earned income (de-
fined below) was less than one-half of your sup-
port (defined below).

2. At least one of your parents was alive at the end of
2010.

3. You are filing a return as single, head of household,
qualifying widow(er), or married filing separately for
2010.

[solomon]

I'll have to disagree with you about parent not appearing in Pub. 970.

from Pub. 970 page 15

Refundable Part of Credit
Forty percent of the American opportunity credit is refund- able for most taxpayers. However, if you were under age
24 at the end of 2010 and the conditions listed below apply
to you, you cannot claim any part of the American opportunity
credit as a refundable credit on your tax return. In-
stead, your allowed credit (figured on Form 8863, Part IV)
will be used to reduce your tax as a nonrefundable credit
only.
You do not qualify for a refund if items 1 (a, b, or c), 2,
and 3 below apply to you.

1. You were:
a. Under age 18 at the end of 2010, or
b. Age 18 at the end of 2010 and your earned in(
come (defined below) was less than one-half of
your support (defined below), or
c. A full-time student over age 18 and under age 24
at the end of 2010 and your earned income (de-
fined below) was less than one-half of your sup-
port (defined below).

2. At least one of your parents was alive at the end of
2010.

3. You are filing a return as single, head of household,
qualifying widow(er), or married filing separately for
2010.

Thanks for the correction - I did not get past the flow chart. I take the instructions that all three must apply to preclude the refund.

[Gene V]

Thanks for the correction - I did not get past the flow chart. I take the instructions that all three must apply to preclude the refund.

Thanks, that's was I was thinking--all three must apply.

[oceanlovin'ea]

accept answer - don't understand

I accept that your conclusion is correct but I don't understand the reasoning behind this.

If student lived at home I can understand not getting it. But there are a world of young people out there that may not have anything to do with their parents anymore. Maybe raised by grandparents or another relative but their parents are still alive. That seems unfair that they couldn't get the refund because that parent was alive.

Strange requirement!

Linda, EA

[AJsTax]

But, hold on

From what I read of the OP the student is supporting herself so 1 a, b or c do not apply. She is providing more than half of her own support. She is independent, not eligible to be a dependent of parents and therefor most certainly does qualify for the refundable portion.

[BOB W]

In my software there is a dropdown window NEXT TO "dependent of another" where I need to select issues relating to your question. The problem is my dropdown is answered with a Yes or NO. But it allows a fully independent person between ages 18 and 23 to get the refundable portion of the credit.

So check your software on the general info page for an area that deals with this issue.

[Burke]

That's the way I read it too. If she did not provide over half of her own support and a parent was living, then no. Although I agree with oceanlovin', it is a strange requirement. Someone else could be providing half her support, rather than a parent.

[S T]

Cfs

I have a worksheet I can try to do on CFS
I would need Federal AGI - filing single?
AOCTC expenses and Qualifed Deduction Expenses
I am willing to try it to see what it produces,

Sandy

[Gary2]

This is the same constraint as the rules for the AMT exemption for people in this group. They don't want wealthy parents, who can't qualify for the credit, to arrange for their kids to get the refundable part of the credit (or to avoid AMT) by providing the child with lots of cash as gifts or even in educational savings accounts over the years.

This hurts the students with loans who can't be claimed by their parents.