Mary has brought to my attention an excellent IRS 2-page comparison of the American Opportunity and Lifetime Learning education tax credits. Click here to download.
Under the heading “Who Can Claim a Dependent’s Expenses?” this IRS tool confirms what I said in my post –
“If the taxpayer does not claim the exemption on the tax return the dependent can claim the credit.”
However it points out a what Mary calls “bed buffalo” in a footnote –
“None of the credit is refundable if the taxpayer claiming the credit is a child (a) who is under age 18 (or a student who is at least age 18 and under 24 and whose earned income does not exceed one-half of his or her own support); (b) who has at least one living parent, and; (c) who does not file a return.”
So while James in my post’s example can claim the credit on his tax return, none of the credit is refundable. This means that James’ tax liability must be at least $2,500 (and, of course, the tuition and other costs used to determine the credit must be at least $4,000) to take full advantage of the credit.
I stand corrected.
A special “thank you” to Mary for keeping me honest!