Nonrefundable education credits for American Opportunity Credit

Forum|Forum|5 years ago
May 15, 2020
1 reply
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I am a parent of a student who was living at home in 2018, we the parents received the full $2500 ($1000+$1500) for this credit. This year the student is no longer a dependent since moving out and supporting themselves, so the credit is now on their taxes but they are only receiving the $1000 refundable credit NOT the $1500 nonrefundable credit. Can you please explain this. Thanks.

BillM223

The nonrefundable credit is applied to taxes assessed. If your child's assessed taxes were zero, then none of the nonrefundable credit will be used. If the assessed taxes were $500, then only $500 of the nonrefundable tax credit could be used.

The refundable credit operates independently of the taxes assessed.

If your child had zero taxes assessed, you might redo the dependent test as shown in IRS Pub 17 (starting on page 25) and determine if your child was a dependent of yours or not.

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