My parents are non US-citizens & non US residents for 2023 & paid my education expenses directly to the college. They can't claim me as a dependent. Can I claim AOTC?

Forum|Forum|2 years ago
February 24, 2024
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IRS Pub 970 - "Refundable Part of Credit check - Age 18 at the end of 2023 and your earned income was less than one-half of your support." I am confused about this as my foreign parents paid the college directly on my behalf. I meet the other criteria of AOTC, except this. I am 18, US citizen, earned <$1000. My parents cannot claim me as a dependent, as they will not file US taxes. Can I claim AOTC?

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Hal_Al

Employee

Q. Can I claim AOTC?

A. No.

It's not whether you can be claimed as a dependent that keeps from getting the AOTC. It's being under age 19. Next year, it will be for being a full time student under age 24.

A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.

Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863

Since you are not claimed as a dependent, you are eligible for the non refundable portion of the AOTC (or the LLC). But, you do not have enough income to have a tax liability, so that does you no good.

gupta-navyaAuthor

Thanks for your response. @Hal_Al

If I read this section:

"Expenses paid by a third party.

Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Therefore, you're treated as having paid expenses that were paid by the third party. For more information and an example, see Who Can Claim a Dependent's Expenses in Pub. 970, chapters 2 and 3."

My text in red below, and the copied portion from your link/Pub 970 in black/italics.

Now considering my parents as third party who paid the education expenses directly, it's treated as paid by me, since my parents don't file US taxes and cannot claim me as a dependent. Based on this assumption, let's go to Line 7.

Line 7 - Answers below

You don't 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 2023, or
	b.	Age 18 at the end of 2023 and* your earned income (defined later) was less than one-half of your support (defined later),* or Age 18 is right. Earned income is less, but then support was not given per the earlier note. The expenses were treated paid by me. Does this mean I received $0 (zero) support, and hence my earned income of $1000 is more. So answer for this question 1 is No.
	c.	Over age 18 and under age 24 at the end of 2023 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 2023. Yes
3.	You're not filing a joint return for 2023. Yes
	So based on this Line 7 does not apply to me. If yes, I should be able to claim the refundable $1000 AOTC. Please correct me if my understanding is incorrect.

Hal_Al

Employee

You're hung up on the issue of "you're treated as having paid expenses that were paid by the third party". That's not what's keeping you from qualifying for the credit.

Q. Age 18 is right. Earned income is less, but then support was not given per the earlier note. The expenses were treated paid by me. Does this mean I received $0 (zero) support, and hence my earned income of $1000 is more. So answer for this question 1 is No.

A. $1000 may be more than the support received from others*, but is nowhere near half your total support for the whole year

Q. So based on this, Line 7 does not apply to me. If yes, I should be able to claim the refundable $1000 AOTC. Please correct me if my understanding is incorrect.

A. Line 7 instructions do apply to you. You understanding is totally incorrect.

*"$1000 may be more than the support received from others" is also misinterpretation. Expenses paid by others are treated as paid by you for the purposes of qualifying as paid expenses. But, they are not treated as paid by you for purposes of the support issues in taxation.