Why student get Refundable American Opportunity credit when his earned income is only $800

[skyworks]

Hi,

Parents AGI over $180k, no educational credits is allowed.

 Dependent (full time Student) earned income (W2 ) is only $800,  tried on parents return did not claim the depend, let the student claim himself.

Why the system let the student get the $1000 refundable ( of American Opportunity credit) plus his small Fed WH.

The student's earned income is less than half of his support. 

Is this correct? 

Thanks!

[qbteachmt]

Read this topic:

https://www.irs.gov/newsroom/american-opportunity-tax-credit-questions-and-answers

Especially pay attention to question 4.

[TaxGuyBill]

No, it is not correct (assuming the child is a full-time student under age 24 and the student is not filing as MFJ).

As for how to 'fix' it in PTO, you'll need to look around or wait until somebody that knows PTO comes by.

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@skyworks wrote:

did not claim the depend, let the student claim himself.

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No.  If the somebody is ELIGIBLE to claim the student, the student can NOT "claim himself".  He must indicate that he CAN be claimed.  There should be another option to say that although he CAN be claimed, nobody is actually claiming him (which will allow the student to claim the non-refundable part of the credit).   When you fix that, that MIGHT also 'fix' things with the American Opportunity Credit.

[sjrcpa]

"let the student claim himself." Should you?

Could the student have been claimed as a dependent on parents' return? If yes, did you indicate that in the software?

Bill-we must have been typing at the same time.

[BobKamman]

I don't know why people are jumping in to answer this question without asking the age of the student. 

[sjrcpa]

Good point.

[skyworks]

Hi you are right, 

The student is 19 yrs old and full time student.

The Dependency Status field was left blank - the system must acting as the student can claim himself.

In a difference case: Another 20yrs old student whose earned income higher and withholding tax is over $3k, so he is getting refund of $2500 credit refunded.

[qbteachmt]

Are you using your IRS resources?

https://www.irs.gov/credits-deductions/individuals/education-credits-aotc-llc

https://www.irs.gov/credits-deductions/individuals/education-credits-questions-and-answers

https://www.irs.gov/credits-deductions/individuals/aotc

Or, are you asking this forum to give you all of that same info as explanation?

[sjrcpa]

"In a difference case: Another 20yrs old student whose earned income higher and withholding tax is over $3k, so he is getting refund of $2500 credit refunded."

Same question - could the 20 year old student be claimed as a dependent?

[skyworks · Accepted solution]

yes the student cab be claimed as dependent. And I selected the Dependancy Status - Can be claimed as dependent.

[skyworks]

thanks - i said the Dependency Status field was left blank before, once I selected Could be Dependent - the system did not calculate the refundable credit. That seemed right to me.

In a different case where the student makes more than half of his support- the system calculate the credit and refund to him.

I am first time use of PTC