Dependent child and American Opportunity Credit

[Terry O]

I know I know the answer - - credit follows the dependency.

 

Client earns $200,000 + ,a nd has 2 kids in college. One is in her 3rd year, and earns $6000 with tuition and fees of $6000. The second child is a Freshman - --earned $1500 and tuition is $28,000.

 

The parents do NOT qualify for ANY credit or tuition deduction.

 

Am I correct in assuming they can elect to NOT claim Child #1 and let her get a small portion of the American Credit?

 

Thanks!

[grandmabee]

I think so and no one claims the exemption

[OldJack]

And how did child #1 support herself if all her earnings went for tuition?

[Jack from Ohio]

Terry O,

You are correct.

[TAXMAN]

What if child 1 is 24 years old?

[Jack from Ohio]

What if child 1 is 24 years old?

If child 1 is 24 years old, he is on his own, and the parents cannot claim him as a qualifying child, therefore education credits are not available to the parents.

[Terry O]

Thank You All!!! When you are truely a SOLE Proprietor - - - -it really helps to have another opinion!!!

[Pacun]

Parents can elect not to claim the exemption for any of their children but NO ONE else can claim the exemption if parents qualify for it. Remember that the credit follows the exemption, so if no one claims the exemption, no one can get the credit.

[jainen]

>>NO ONE else can claim the exemption if parents qualify for it<<

No, sometimes a sibling or grandparent could. If the parents don't claim the child but the child is also a qualifying child to some other family member with higher AGI than both parents, that person could take the exemption and everything.

[Pacun]

You are right Jainen.

Going back to the question at hand, there are 4 people involved: the parents and the two children... if parents decide not to claim the child and they qualify for the exemption, then the child cannot claim his own exemption, correct?

[grandmabee]

he cannot claim his own exemption credit but can claim the education credit. there is a good example in quickfinder pg 13.8

[Max W]

Isn't this a conflict in the tax code which requires parent to claim dependent if qualified to claim it?  Or, is it something that has been waived for the AOC?.

 

[Lion EA]

The parent is not required to claim a dependent.  If the parent does not but was qualified to claim the dependent, then the dependent can not claim himself.  Dependent also can not claim any refundable AOC.  But, he can claim education credits.