HOPE credit refundable for independent student

[Gretel]

One of the requirements that a student under the age of 24 can claim the refundable part of the HOPE credit is that he has earned income of more than one-half of his total support. My taxpayers provides more than one half of the his own support since student loans were used to pay for college and he is responsible for paying them back. However, earned income is less than parents support plus student loans.

Can he claim the refundable part?

[Burke]

I do not believe the refundable portion is an eligible deduction in this case unless both parents were deceased. See TTB 12-3, #2, for the exceptions for taxpayers under age 24. I have two that DO qualify based on this rule. This is not something the software would know, unless it is in the questionnaire portion.

[Gretel]

I read this part at least three times and maybe I misunderstood. It says you cannot claim it all three apply. I understand this to mean that one does not apply you can claim.

[Gretel]

If it is true that a student loan does not count towards a students income limitations for the purpose of getting the refundable portion of the HOPE credit, one easily can have the situation that parents cannot claim the student and student cannot claim refundable part of HOPE credit.

[David1980]

I read this part at least three times and maybe I misunderstood. It says you cannot claim it all three apply. I understand this to mean that one does not apply you can claim.

Depending what you are reading it can be a bit confusing.

From the 8863 instructions:

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

1.
You were:
a. Under age 18 at the end of 2014, or
b. Age 18 at the end of 2014 and your earned income (defined later) was less than one-half of your support (defined later), or
c. Over age 18 and under age 24 at the end of 2014 and a full-time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
2. At least one of your parents was alive at the end of 2014.
3. You are not filing a joint return for 2014

You cannot claim if all three being #1, #2, and #3 apply. However #1 applies if any of 1a, 1b, or 1c apply.

Right below that in the 8863 instructions the IRS has a series of questions that you can work through question by question that is usually easier to understand. http://www.irs.gov/pub/irs-pdf/i8863.pdf page 5 right column starting with "You can answer the following questions to determine whether you qualify for a refundable American opportunity credit."

If it is true that a student loan does not count towards a students income limitations for the purpose of getting the refundable portion of the HOPE credit, one easily can have the situation that parents cannot claim the student and student cannot claim refundable part of HOPE credit.

I believe that to be true.

[Burke]

Based on that questionnaire, if #5 is yes, and #6 is yes, and #7 is no, then the TP does not qualify. It gives me a headache.

[Gretel]

Depending what you are reading it can be a bit confusing.

Right below that in the 8863 instructions the IRS has a series of questions that you can work through question by question that is usually easier to understand. http://www.irs.gov/pub/irs-pdf/i8863.pdf page 5 right column starting with "You can answer the following questions to determine whether you qualify for a refundable American opportunity credit."

These questions are sure helpful but also confusing or at least one most concentrate real hard to get the meaning. I sure learned something knew. Thanks.

[dtlee]

Sorry I did not see this sooner.

The rules are based on the Kiddie Tax Rules not the rules for dependency, so they are a bit confusing.

I built this flowchart a few years ago based on one I made for the Kiddie Tax.

To me, it makes the rules easier to see.

http://1drv.ms/1LdqPbB

[Gretel]

The rules are based on the Kiddie Tax Rules not the rules for dependency, so they are a bit confusing.

I built this flowchart a few years ago based on one I made for the Kiddie Tax.

To me, it makes the rules easier to see.

http://1drv.ms/1LdqPbB

Doug, thank you so much. This is a great chart.